{"title":"Debt maturity and the marginal value of cash holdings","authors":"Hail Jung , Sanghak Choi","doi":"10.1016/j.frl.2024.106352","DOIUrl":null,"url":null,"abstract":"<div><div>This study investigates the impact of debt maturity on the marginal value of cash holdings. It posits that short-term debt acts as a crucial governance mechanism by reducing agency conflicts and aligning managerial actions with shareholder interests. Using a sample of U.S. public firms, the results indicate that firms with higher proportions of short-term debt have a greater marginal value of cash, reflecting more efficient resource allocation and reduced managerial opportunism. The necessity for frequent capital market interactions associated with short-term debt mitigates agency conflicts. Additionally, the study explores three potential mechanisms: financial constraints, managerial moral hazard, and information asymmetry.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"70 ","pages":"Article 106352"},"PeriodicalIF":7.4000,"publicationDate":"2024-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1544612324013813","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This study investigates the impact of debt maturity on the marginal value of cash holdings. It posits that short-term debt acts as a crucial governance mechanism by reducing agency conflicts and aligning managerial actions with shareholder interests. Using a sample of U.S. public firms, the results indicate that firms with higher proportions of short-term debt have a greater marginal value of cash, reflecting more efficient resource allocation and reduced managerial opportunism. The necessity for frequent capital market interactions associated with short-term debt mitigates agency conflicts. Additionally, the study explores three potential mechanisms: financial constraints, managerial moral hazard, and information asymmetry.
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