The Effect of Debt Maturity on Future Stock Price

Document Type : Research Paper

Authors

1 Associate Professor of Accounting, University of Isfahan

2 Master of Accounting

Abstract

One of the factors that led to stock price crash is managers’ activities to conceal bad news and negative performance inside of the company. One of the cases that can prevent opportunistic behavior of managers is maturity of debt. Debt maturity will cause that creditors in order to renew the contract called for more information about the firm's position and this situation prevents the accumulation of bad news by managers and ultimately prevented a sharp fall in stock prices. The purpose of this study is to determine the effect of Debt Maturity on the future stock price crash risk. In order to attain the research purpose, 102 companies among the listed companies in Tehran Stock Exchange during the years of 1388 to 1393 (2010 – 2015) were selected as statistical sample. The future stock price crash risk proxy is used for testing of hypothesis with multivariate regression. The results of this study showed a significant inverse relationship between the debt maturity and future Stock Price Crash Risk. In other words, with shorter debt maturity, the stock price crash risk is also can reduced

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References

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History

  • Receive Date: 11 April 2016
  • Revise Date: 02 July 2016
  • Accept Date: 05 July 2016

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