Influence of collateral and age on corporate capital structure

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Being financed by third-party capital requires the companies to put up collateral or assets in guarantee, consisting of real estate, inventories, and accounts receivable that in turn depend on specific life cycles, among other aspects. The main object of this study is to analyze whether corporate debt is related to age and collateral. To do so, a sample of 194 public and private Brazilian companies was studied between 2010 and 2017. The findings indicate that more mature businesses have lower debt levels. In terms of the collateral variable and interactions between collateral and age, a negative relation was noted with financial leverage, contrary to what was expected. This fact indicates a possible lack of quality in collateral over time. Furthermore, it is noted that there is no directly proportional relationship between progression in age and collateral. The contribution of the study consists of analyzing the relationships between collateral and age in terms of the debt levels of public and private Brazilian businesses. The distinctions between these groups may throw light on organizations in the emerging countries in terms of how to handle financing decisions with financial and capital market institutions.

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    • Figure 1a. Comparison between age and collateral
    • Figure 1b. Collateral composition
    • Table 1. Econometric model variables
    • Table 2. Distribution of samples over time
    • Table 3. Descriptive statistics of samples
    • Table 4. Analysis of total sample correlation
    • Table 5a. Cross-section pooled regression for public and private sub-samples
    • Table 5b. Cross-section pooled regression for total sample