Essays on Corporate Finance and Financial Intermediation
Han, Joong Ho
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https://hdl.handle.net/2142/87434
Description
Title
Essays on Corporate Finance and Financial Intermediation
Author(s)
Han, Joong Ho
Issue Date
2005
Doctoral Committee Chair(s)
George Pennacchi
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Banking
Language
eng
Abstract
In the last essay, I study how liquidation values can affect the determination of debt maturity. I document the first empirical evidence supporting the claim that higher liquidation value can indeed decrease debt maturity. I document that maturity for cash lending, which provides cash usable at the borrower's discretion, decreases with liquidation value of a borrowing firm's total assets. On the other hand, the maturity for capital goods lending, which limits a debtor's ability to transform assets financed, decreases with industry-level market demand for fixed assets. These findings are consistent with the Myers and Rajan (1998)'s prediction that, when liquidation value is high, shortening debt maturity is optimal to avoid asset diversion against the creditors' interest.
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