Working Paper: CEPR ID: DP16043
Authors: Sven Klinger; Olav Syrstad; Guillaume Vuillemey
Abstract: Using new transaction-level data for non-financial commercial paper (CP) in the U.S., we show that companies systematically reduce their outstanding short-term debt on quarterly and annual disclosure dates. Constraints on CP lending supply cannot explain this pattern. Instead, firms prefer repaying short-term debt over disclosing high cash holdings to signal that their cash is readily available and not trapped in foreign subsidiaries. Consistent with this interpretation, we show that firms with higher cash holdings, more sales in regions with tight capital controls, or with higher debt-equity ratios compared to industry peers reduce their short-term debt more aggressively at disclosure dates.
Keywords: cash; commercial paper; adverse selection; disclosure; window dressing
JEL Codes: G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash holdings (E41) | short-term debt repayment (G32) |
| higher cash holdings (G32) | more aggressive debt repayment (G51) |
| sales in regions with tight capital controls (F38) | stronger tendency to repay short-term debt (G32) |
| higher debt-equity ratios (G32) | more likely to reduce short-term debt (G32) |
| 2017 tax reform (H26) | ability to access foreign cash (F31) |
| ability to access foreign cash (F31) | impact on gross debt management strategies (H63) |