Credit Information Quality and Corporate Debt Maturity : Theory and Evidence

This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and h...

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Main Authors:	Sorge, Marco, Zhang, Chendi
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ACCOUNTING STANDARDS AGENCY PROBLEMS ARBITRAGE ASSET LIQUIDITY ASYMMETRIC INFORMATION BANK ASSETS BANK LENDING BANK LOANS BANKING CRISES BANKING CRISIS BANKING RELATIONSHIPS BANKING SECTOR BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING CAPITAL MARKETS CAPITAL REQUIREMENTS CAPITALIZATION CORPORATE FINANCE COVERAGE CREDIT MARKETS CREDIT RATINGS CREDIT RATIONING CREDIT RISK DEBT DEFAULT RISK DEPOSITS EMERGING MARKETS EQUILIBRIUM EXPECTED RETURNS FINANCIAL CRISES FINANCIAL INSTITUTIONS GDP GDP PER CAPITA GROWTH POTENTIAL GROWTH RATE ILLIQUIDITY IMPERFECT INFORMATION INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INFORMATION ACQUISITION INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES LEGAL FRAMEWORK LOAN MATURITY MATURITIES MICRO FACTORS MORAL HAZARD OPPORTUNITY SET OVERHEAD COSTS PERFECT COMPETITION PERFECT INFORMATION PREDICTIONS PRICE INFLATION PROBABILITY OF DEFAULT PROFITABILITY RELATIONSHIP BANKING RETURN ON ASSETS SECURITIES SHAREHOLDERS SMALL BUSINESS T-BILLS TERM FINANCE TIME VALUE OF MONEY TRANSACTION COSTS TRANSPARENCY TREASURY BILLS VOLATILITY
Online Access:	http://documents.worldbank.org/curated/en/2007/06/7695810/credit-information-quality-corporate-debt-maturity-theory-evidence http://hdl.handle.net/10986/7395

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recordtype	oai_dc
spelling	okr-10986-73952021-04-23T14:02:33Z Credit Information Quality and Corporate Debt Maturity : Theory and Evidence Sorge, Marco Zhang, Chendi ACCOUNTING ACCOUNTING STANDARDS AGENCY PROBLEMS ARBITRAGE ASSET LIQUIDITY ASYMMETRIC INFORMATION BANK ASSETS BANK LENDING BANK LOANS BANKING CRISES BANKING CRISIS BANKING RELATIONSHIPS BANKING SECTOR BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING CAPITAL MARKETS CAPITAL REQUIREMENTS CAPITALIZATION CORPORATE FINANCE COVERAGE CREDIT MARKETS CREDIT RATINGS CREDIT RATIONING CREDIT RISK DEBT DEFAULT RISK DEPOSITS EMERGING MARKETS EQUILIBRIUM EXPECTED RETURNS FINANCIAL CRISES FINANCIAL INSTITUTIONS GDP GDP PER CAPITA GROWTH POTENTIAL GROWTH RATE ILLIQUIDITY IMPERFECT INFORMATION INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INFORMATION ACQUISITION INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES LEGAL FRAMEWORK LOAN MATURITY MATURITIES MICRO FACTORS MORAL HAZARD OPPORTUNITY SET OVERHEAD COSTS PERFECT COMPETITION PERFECT INFORMATION PREDICTIONS PRICE INFLATION PROBABILITY OF DEFAULT PROFITABILITY RELATIONSHIP BANKING RETURN ON ASSETS SECURITIES SHAREHOLDERS SMALL BUSINESS T-BILLS TERM FINANCE TIME VALUE OF MONEY TRANSACTION COSTS TRANSPARENCY TREASURY BILLS VOLATILITY This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance. 2012-06-07T15:23:05Z 2012-06-07T15:23:05Z 2007-06 http://documents.worldbank.org/curated/en/2007/06/7695810/credit-information-quality-corporate-debt-maturity-theory-evidence http://hdl.handle.net/10986/7395 English Policy Research Working Paper; No. 4239 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ACCOUNTING STANDARDS AGENCY PROBLEMS ARBITRAGE ASSET LIQUIDITY ASYMMETRIC INFORMATION BANK ASSETS BANK LENDING BANK LOANS BANKING CRISES BANKING CRISIS BANKING RELATIONSHIPS BANKING SECTOR BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING CAPITAL MARKETS CAPITAL REQUIREMENTS CAPITALIZATION CORPORATE FINANCE COVERAGE CREDIT MARKETS CREDIT RATINGS CREDIT RATIONING CREDIT RISK DEBT DEFAULT RISK DEPOSITS EMERGING MARKETS EQUILIBRIUM EXPECTED RETURNS FINANCIAL CRISES FINANCIAL INSTITUTIONS GDP GDP PER CAPITA GROWTH POTENTIAL GROWTH RATE ILLIQUIDITY IMPERFECT INFORMATION INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INFORMATION ACQUISITION INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES LEGAL FRAMEWORK LOAN MATURITY MATURITIES MICRO FACTORS MORAL HAZARD OPPORTUNITY SET OVERHEAD COSTS PERFECT COMPETITION PERFECT INFORMATION PREDICTIONS PRICE INFLATION PROBABILITY OF DEFAULT PROFITABILITY RELATIONSHIP BANKING RETURN ON ASSETS SECURITIES SHAREHOLDERS SMALL BUSINESS T-BILLS TERM FINANCE TIME VALUE OF MONEY TRANSACTION COSTS TRANSPARENCY TREASURY BILLS VOLATILITY
spellingShingle	ACCOUNTING ACCOUNTING STANDARDS AGENCY PROBLEMS ARBITRAGE ASSET LIQUIDITY ASYMMETRIC INFORMATION BANK ASSETS BANK LENDING BANK LOANS BANKING CRISES BANKING CRISIS BANKING RELATIONSHIPS BANKING SECTOR BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING CAPITAL MARKETS CAPITAL REQUIREMENTS CAPITALIZATION CORPORATE FINANCE COVERAGE CREDIT MARKETS CREDIT RATINGS CREDIT RATIONING CREDIT RISK DEBT DEFAULT RISK DEPOSITS EMERGING MARKETS EQUILIBRIUM EXPECTED RETURNS FINANCIAL CRISES FINANCIAL INSTITUTIONS GDP GDP PER CAPITA GROWTH POTENTIAL GROWTH RATE ILLIQUIDITY IMPERFECT INFORMATION INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INFORMATION ACQUISITION INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES LEGAL FRAMEWORK LOAN MATURITY MATURITIES MICRO FACTORS MORAL HAZARD OPPORTUNITY SET OVERHEAD COSTS PERFECT COMPETITION PERFECT INFORMATION PREDICTIONS PRICE INFLATION PROBABILITY OF DEFAULT PROFITABILITY RELATIONSHIP BANKING RETURN ON ASSETS SECURITIES SHAREHOLDERS SMALL BUSINESS T-BILLS TERM FINANCE TIME VALUE OF MONEY TRANSACTION COSTS TRANSPARENCY TREASURY BILLS VOLATILITY Sorge, Marco Zhang, Chendi Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
relation	Policy Research Working Paper; No. 4239
description	This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance.
format	Publications & Research :: Policy Research Working Paper
author	Sorge, Marco Zhang, Chendi
author_facet	Sorge, Marco Zhang, Chendi
author_sort	Sorge, Marco
title	Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
title_short	Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
title_full	Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
title_fullStr	Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
title_full_unstemmed	Credit Information Quality and Corporate Debt Maturity : Theory and Evidence
title_sort	credit information quality and corporate debt maturity : theory and evidence
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2007/06/7695810/credit-information-quality-corporate-debt-maturity-theory-evidence http://hdl.handle.net/10986/7395
_version_	1764401957538103296

Credit Information Quality and Corporate Debt Maturity : Theory and Evidence

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