The key drivers of corporate long-term debt variation

Abstract

The objective of this thesis is to study the determinants of the variation of corporate long-term debt, using data for US firms between 1976 and 2023. This thesis shows that both small and medium firms were the main drivers of the downward trend of corporate long-term debt, from 1976 to 2000 and of the upward trend in the two following decades. From 2021 to 2023 it is reported a downward trend caused by small, medium and large firms. Using an OLS estimator for the regressions, this thesis includes firm specific characteristics, related to hypotheses stated in previous literature, and macroeconomic variables which influence the supply and demand of credit. This thesis reports a negative relation between information asymmetry and corporate long-term debt, robust to all specifications and to different proxies for corporate long-term debt. There is also evidence that the maturity matching hypothesis consistently explains its variation, however, this relationship is not robust to different definitions of corporate long-term debt. The downward trend of corporate long-term debt was explained by the increase of the proportion of long-term US treasuries and by the decrease of the proportion of bonds owned by insurance companies. The increase of corporate long-term debt was partially explained by the decrease of the proportion of insured deposits to bank´s total assets. This thesis suggests that both firm characteristics and macroeconomic variables are relevant in explaining the variation of corporate long-term debt, even though macroeconomic variables become less meaningful, after 2000.

Date of Award	3 Feb 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)