Baum, Christopher F. Schäfer, Dorothea Talavera, Oleksandr
Year of Publication:
DIW Discussion Papers 635
Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable.
profitability short-term liabilities maturity structure capital structure