Ilitch School professors and alum published in another top finance journal

Ilitch School Finance Professors Sudip Datta and Mia Iskandar-Datta and recent WSU alum and former doctoral student and Trang Doan have co-authored the article, “Policy Uncertainty and the Maturity Structure of Corporate Debt,” which was published in the October 2019 issues of the Journal of Financial Stability. The article examines how firms manage debt risk during varying levels of uncertainty. A full abstract can be found below.


This study examines the effect of policy uncertainty on corporate debt maturity structure. We find that elevated levels of policy uncertainty lead firms to shorten debt maturity, indicating that firms become more cautious in committing to long-term debt obligations and is suggestive of increased risk aversion during high policy uncertainty periods. However, not all firms react similarly. In contrast to Myers' (1977) prediction, high growth firms lengthen debt maturity during high policy uncertainty periods. The evidence regarding the relationship between debt maturity and credit quality is not non-monotonic as firms with highest and lowest credit quality diverge in terms of debt maturity when policy uncertainty is elevated. Further, larger firms increase their debt maturity, while financially-constrained firms and firms with greater exposure to domicile political environment obtain short-term debt. The results are robust to a battery of tests including the use of instrument variable and placebo analysis.