Discussion Paper
Firms’ financing choice between short-term and long-term debts: Are they substitutes?
Abstract: When selecting debt to finance their operations and investments, companies face crucial decisions regarding the appropriate types of debt. Despite the classic Modigliani–Miller (1958) capital structure irrelevance result, real-world market frictions can significantly impact a firm's capital structure decisions. This reality means that one debt type is not a perfect substitute for another, due to differences in important factors including maturity structures, funding purposes, rollover risks, and funding costs.
https://doi.org/10.17016/2380-7172.3438
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: FEDS Notes
Publication Date: 2024-05-03
Number: 2024-05-03-1