Chaiporn Vithessonthi, Acting Associate Dean (Administration and International Relations) of the Faculty of Economics, will present his research paper titled “Corporate Debt Maturity and Future Firm Performance Volatility” (co-authored with Meg Adachi-Sato) at the 2016 Annual Meeting of the Financial Management Association International (http://www.fma.org), held in Las Vegas, NV, USA during October 19-22, 2016.
Abstract of the paper
We propose a simple idea that corporate debt maturity should serve as a good indicator of future firm performance volatility. We show in a simple three-period model that the riskiness of corporate investment is a decreasing function of corporate debt maturity. If “observable” corporate debt maturity and ex ante “unobservable” corporate risk-taking is highly correlated, corporate debt maturity should be highly correlated with “ex post” realized firm performance volatility in following years. Using data on publicly listed firms in 10 developing and developed countries over the period 1991-2013, we find that future firm operating performance volatility decreases as corporate debt maturity increases and that future firm value volatility is not associated with corporate debt maturity. In addition, banking sector development and export intensity of a country play an important role in determining firm operating performance volatility.
The paper is available online at SSRN (http://ssrn.com/abstract=2629916)
and is also included in PIER Discussion Paper Series (https://www.pier.or.th/wp-content/uploads/2016/05/pier_dp_029.pdf).