How Does Long-Term Finance Affect Economic Volatility?

A. Demirgüç-Kunt, Bálint Horváth, Harry Huizinga

Research output: Working paperDiscussion paperOther research output

800 Downloads (Pure)

Abstract

In an approach analogous to Rajan and Zingales (1998), we examine how the ability to access long-term debt affects firm-level growth volatility. We find that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages62
Volume2016-005
Publication statusPublished - 21 Jan 2016

Publication series

NameCentER Discussion Paper
Volume2016-005

Fingerprint

Finance
Growth volatility
Economic volatility
Refinancing
Industry
Financing
Long-term debt
Contract enforcement
Financial system
Credit

Keywords

  • debt maturity
  • finanical dependence
  • firm volatiliy
  • financial development

Cite this

Demirgüç-Kunt, A., Horváth, B., & Huizinga, H. (2016). How Does Long-Term Finance Affect Economic Volatility? (CentER Discussion Paper; Vol. 2016-005). Tilburg: Economics.
Demirgüç-Kunt, A. ; Horváth, Bálint ; Huizinga, Harry. / How Does Long-Term Finance Affect Economic Volatility?. Tilburg : Economics, 2016. (CentER Discussion Paper).
@techreport{59312b2d34184a1cbe2449f1825cc552,
title = "How Does Long-Term Finance Affect Economic Volatility?",
abstract = "In an approach analogous to Rajan and Zingales (1998), we examine how the ability to access long-term debt affects firm-level growth volatility. We find that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.",
keywords = "debt maturity, finanical dependence, firm volatiliy, financial development",
author = "A. Demirg{\"u}{\cc}-Kunt and B{\'a}lint Horv{\'a}th and Harry Huizinga",
year = "2016",
month = "1",
day = "21",
language = "English",
volume = "2016-005",
series = "CentER Discussion Paper",
publisher = "Economics",
type = "WorkingPaper",
institution = "Economics",

}

Demirgüç-Kunt, A, Horváth, B & Huizinga, H 2016 'How Does Long-Term Finance Affect Economic Volatility?' CentER Discussion Paper, vol. 2016-005, Economics, Tilburg.

How Does Long-Term Finance Affect Economic Volatility? / Demirgüç-Kunt, A.; Horváth, Bálint; Huizinga, Harry.

Tilburg : Economics, 2016. (CentER Discussion Paper; Vol. 2016-005).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - How Does Long-Term Finance Affect Economic Volatility?

AU - Demirgüç-Kunt, A.

AU - Horváth, Bálint

AU - Huizinga, Harry

PY - 2016/1/21

Y1 - 2016/1/21

N2 - In an approach analogous to Rajan and Zingales (1998), we examine how the ability to access long-term debt affects firm-level growth volatility. We find that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.

AB - In an approach analogous to Rajan and Zingales (1998), we examine how the ability to access long-term debt affects firm-level growth volatility. We find that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.

KW - debt maturity

KW - finanical dependence

KW - firm volatiliy

KW - financial development

M3 - Discussion paper

VL - 2016-005

T3 - CentER Discussion Paper

BT - How Does Long-Term Finance Affect Economic Volatility?

PB - Economics

CY - Tilburg

ER -

Demirgüç-Kunt A, Horváth B, Huizinga H. How Does Long-Term Finance Affect Economic Volatility? Tilburg: Economics. 2016 Jan 21. (CentER Discussion Paper).