Journal of Applied Finance & Banking

What do we Know about Corporate Debt Maturity Structure in Saudi Arabia?

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• Abstract

   

  This study examines the firm-specific and macroeconomic factors that influence corporate debt maturity structure in Saudi Arabia and explores whether existing theories can predict corporate debt maturity structure. The sample includes 121 listed non-financial firms operating in Saudi Arabia over the years 2010-2021 and employs a static ordinary least square (OLS) model before and after incorporating industry fixed effects. Approximately 52% of Saudi firms’ total debt consists of long-term debt, which is higher than other firms' long-term debt usage, operating in emerging markets. Furthermore, the study finds that both firm-specific and macroeconomic factors are important determinants of Saudi firms’ debt maturity structure decisions. The firm-specific determinants including leverage, profitability, size, liquidity, and asset maturity are positively related to corporate debt maturity choice. However, firms’ risk is negatively associated with debt maturity structure. Economic growth (GDP) has a positive linkage with corporate debt maturity, while the interest rate negatively impacts long-term debt maturity. The results support the matching theory, while it does not support the agency and the signaling theories. At best, this is one of the earliest studies that investigate the influence of firm-specific and macroeconomic factors on Saudi firms’ debt maturity structure decisions.

   

  JEL classification numbers: G3, G32.

  Keywords: Debt maturity, Firm-related factors, Macroeconomic factors, Saudi Arabia.