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The literature on corporate borrowing in the post-liberalized India has so far focused
attention on the determinants of financing choice of large public corporations. Available evidence
in this regard from Kakani (1999), Bhaduri (2002 and 2002a), Guha-Khasnobis and
Bhaduri (2002), Mahakud and Bhole (2003), Bhole and Mahakud (2004), Datta and Majumdar
(2006) and Mahakud (2006) reveals that the determinants of capital structure choice in the
Indian context are not too different from those of developed and other developing
markets. Increasingly, however, research is moving beyond an examination of the basic leverage
choice to more detailed aspects of the financing decision. In this study, we extend the
existing literature on corporate borrowing in India to examine the determinants of the
maturity structure of the firm's debt using a sample of manufacturing firms listed on the Bombay
Stock Exchange (BSE).
The existing literature on debt maturity structure is far from adequate, although a
number of research studies have dealt with the issue indirectly; for instance, Titman and
Wessels (1988), Barclay and Smith (1995), Beevan and Danbolt (2002) employ alternative
measures of borrowing (long-term and short-term) and relate them to firm-specific factors
while analyzing the determinants of borrowing behavior of the firms. Available literature
dealing directly with the issue of debt maturity focuses upon the developed markets of the US and
the UK (for example, Mitchell, 1993; Barclay and Smith, 1995; Stohs and Mauer, 1996;
Ooi, 1999; Ozkan, 2000 and 2002; and Scherr and Hulburt, 2001). Cross-country studies
(Antoniou et al., 2006 examine the case of France, Germany and the UK) on the issue are
far too few, as are studies in the context of developing economies (Korner, 2007 provides
evidence from Czech firms). There have been no empirical studies with regard to debt maturity
structure in the Indian context, and the primary objective of this study is to bridge this gap and, at
the same time, analyze the necessity and desirability of government intervention in fostering
the availability of long-term debt finance, as also the role of term lending institutions. |
