Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-30T20:41:08.721Z Has data issue: false hasContentIssue false
  • English
  • Français

Maturity Clienteles and Corporate Bond Maturities

Published online by Cambridge University Press:  21 July 2022

Alexander W. Butler Open the ORCID record for Alexander W. Butler [Opens in a new window] ,
Xiang Gao  and
Cihan Uzmanoglu
Alexander W. Butler*
Affiliation:
Rice University Jones Graduate School of Business
Xiang Gao
Affiliation:
Loyola University Chicago Quinlan School of Business [email protected]
Cihan Uzmanoglu
Affiliation:
Binghamton University – SUNY School of Management [email protected]
*
[email protected] (corresponding author)
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

The average maturity of newly issued corporate bonds has declined substantially over the past 40 years, and the traditional determinants of debt maturity fail to explain this decline fully. We show that the changing composition of investors in the corporate bond market influences bond maturities. The results of a Granger causality test, an instrumental variable approach, and a natural experiment suggest that a decline in the insurance companies’ – which prefer long-term bonds – ownership share in the corporate bond market explains a significant part of the unexplained maturity decline. These findings illustrate how investor preferences can have real effects on corporations.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 3 , May 2023 , pp. 1263 - 1294
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank an anonymous referee, Hendrik Bessembinder (the editor), Lee Ann Butler, Larry Harris, David Hwang, Murali Jagannathan, Shikha Jaiswal (FMA discussant), Christian Lundblad (WFA discussant), Rajesh Narayanan, Maureen O’Hara, Yoon Shin (Applied Finance Conference discussant), Shweta Srinivasan, James Weston, and the seminar participants at the 2019 Western Finance Association Annual Meeting, the 2019 Applied Finance Conference, the 2018 Financial Management Association Annual Meeting, Binghamton University–SUNY, California State University–East Bay, Ozyegin University, Rochester Institute of Technology, and Rutgers University–Camden for helpful comments.

References

Aivazian, V. A.; Ge, Y.; and Qiu, J.. “Debt Maturity Structure and Firm Investment.” Financial Management, 34 (2005), 107–119.CrossRefGoogle Scholar
Badoer, D. C., and James, C. M.. “The Determinants of Long-Term Corporate Debt Issuances.” Journal of Finance, 71 (2016), 457–492.CrossRefGoogle Scholar
Baghai, R. P.; Servaes, H.; and Tamayo, A.. “Have Rating Agencies Become More Conservative? Implications for Capital Structure and Debt Pricing.” Journal of Finance, 69 (2014), 1961–2005.CrossRefGoogle Scholar
Barclay, M. J., and Smith, C. W. Jr. “The Maturity Structure of Corporate Debt.” Journal of Finance, 50 (1995), 609–631.CrossRefGoogle Scholar
Bates, T. W.; Kahle, K. M.; and Stulz, R. M.. “Why Do US Firms Hold So Much More Cash than They Used To?” Journal of Finance, 64 (2009), 1985–2021.CrossRefGoogle Scholar
Berger, A. N.; Espinosa‐Vega, M. A.; Frame, W. S.; and Miller, N. H.. “Debt Maturity, Risk, and Asymmetric Information.” Journal of Finance, 60 (2005), 2895–2923.CrossRefGoogle Scholar
Berger, P. G.; Ofek, E.; and Swary, I.. “Investor Valuation of the Abandonment Option.” Journal of Financial Economics, 42 (1996), 259–287.CrossRefGoogle Scholar
Brick, I. E., and Ravid, S. A.. “On the Relevance of Debt Maturity Structure.” Journal of Finance, 40 (1985), 1423–1437.CrossRefGoogle Scholar
Chen, L.; Lesmond, D. A.; and Wei, J.. “Corporate Yield Spreads and Bond Liquidity.” Journal of Finance, 62 (2007), 119–149.CrossRefGoogle Scholar
Collin-Dufresne, P.; Goldstein, R. S.; and Martin, J. S.. “The Determinants of Credit Spread Changes.” Journal of Finance, 56 (2001), 2177–2207.CrossRefGoogle Scholar
Coval, J. D., and Moskowitz, T. J.. “Home Bias at Home: Local Equity Preference in Domestic Portfolios.” Journal of Finance, 54 (1999), 2045–2073.CrossRefGoogle Scholar
Custódio, C.; Ferreira, M. A.; and Laureano, L.. “Why Are US Firms Using More Short-Term Debt?” Journal of Financial Economics, 108 (2013), 182–212.CrossRefGoogle Scholar
Desai, M. A., and Jin, L.. “Institutional Tax Clienteles and Payout Policy.” Journal of Financial Economics, 100 (2011), 68–84.CrossRefGoogle Scholar
Duffee, G. R. “The Relation Between Treasury Yields and Corporate Bond Yield Spreads.” Journal of Finance, 53 (1998), 2225–2241.CrossRefGoogle Scholar
Ellul, A.; Jotikasthira, C.; Kartasheva, A.; Lundblad, C. T.; and Wagner, W.. “Insurers as Asset Managers and Systemic Risk.” Working Paper, Kelley School of Business Research Paper No. 18-4 (2020) and SMU Cox School of Business Research Paper No. 18-18 (2020).Google Scholar
Ellul, A.; Jotikasthira, C.; and Lundblad, C. T.. “Regulatory Pressure and Fire Sales in the Corporate Bond Market.” Journal of Financial Economics, 101 (2011), 596–620.CrossRefGoogle Scholar
Foley, C. F.; Hartzell, J. C.; Titman, S.; and Twite, G., “Why Do Firms Hold So Much Cash? A Tax-Based Explanation.” Journal of Financial Economics, 86 (2007), 579–607.CrossRefGoogle Scholar
Graham, J. R., and Kumar, A.. “Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors.” Journal of Finance, 61 (2006), 1305–1336.CrossRefGoogle Scholar
Greenwood, R.; Hanson, S.; and Stein, J. C.. “A Gap-Filling Theory of Corporate Debt Maturity Choice.” Journal of Finance, 65 (2010), 993–1028.CrossRefGoogle Scholar
Guedes, J., and Opler, T.. “The Determinants of the Maturity of Corporate Debt Issues.” Journal of Finance, 51 (1996), 1809–1833.CrossRefGoogle Scholar
Harford, J.; Klasa, S.; and Maxwell, W. F.. “Refinancing Risk and Cash Holdings.” Journal of Finance, 69 (2014), 975–1012.CrossRefGoogle Scholar
Krishnamurthy, A., and Vissing-Jorgensen, A.. “The Aggregate Demand for Treasury Debt.” Journal of Political Economy, 120 (2012), 233–267.CrossRefGoogle Scholar
Lugo, S. “Short-Term Debt Catering.” Journal of Corporate Finance, 66 (2021), 101817.CrossRefGoogle Scholar
Massa, M., and Simonov, A.. “Hedging, Familiarity and Portfolio Choice.” Review of Financial Studies, 19 (2006), 633–685.CrossRefGoogle Scholar
Massa, M.; Yasuda, A.; and Zhang, L.. “Supply Uncertainty of the Bond Investor Base and the Leverage of the Firm.” Journal of Financial Economics, 110 (2013), 185–214.CrossRefGoogle Scholar
Massa, M., and Zhang, L.. “The Spillover Effects of Hurricane Katrina on Corporate Bonds and the Choice Between Bank and Bond Financing.” Journal of Financial and Quantitative Analysis, 56 (2021), 885–913.CrossRefGoogle Scholar
Myers, S. C. “Determinants of Corporate Borrowing.” Journal of Financial Economics, 5 (1977), 147–175.CrossRefGoogle Scholar
Rydqvist, K.; Spizman, J.; and Strebulaev, I.. “Government Policy and Ownership of Equity Securities.” Journal of Financial Economics, 111 (2014), 70–85.CrossRefGoogle Scholar
Webb, B. L., and Lilly, C. C. III. Raising the Safety Net: Risk-Based Capital for Life Insurance Companies. Kansas City, MO: National Association of Insurance Commissioners (NAIC) (1994).Google Scholar
Xu, Q. “Kicking Maturity Down the Road: Early Refinancing and Maturity Management in the Corporate Bond Market.” Review of Financial Studies, 31 (2018), 3061–3097.CrossRefGoogle Scholar
Supplementary material: PDF

Butler et al. supplementary material

Butler et al. supplementary material
Download Butler et al. supplementary material(PDF)
PDF 455.3 KB