The Effects of Short-Term Liabilities on Profitability: The Case of Germany

Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable.

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Year of publication:	2006
Authors:	Baum, Christopher F. ; Schäfer, Dorothea ; Talavera, Oleksandr
Institutions:	DIW Berlin (Deutsches Institut für Wirtschaftsforschung)
Subject:	profitability \| short-term liabilities \| maturity structure \| capital structure

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Extent:	application/pdf
Series:	Discussion Papers of DIW Berlin. - ISSN 1619-4535.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 635 17 pages long
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; G30 - Corporate Finance and Governance. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005068970