Corporate Debt Maturity and the Real E¤ects of the 2007 Credit Crisis*

We use the 2007 credit crisis to gauge the e¤ect of \u85nancial contracting on real corporate behavior. We identify heterogeneity in \u85nancial contracting at the onset of the crisis by exploiting ex-ante variation in long-term debt maturity structure. Our empirical methodology accounts for observed and unobserved (time-invariant) rm characteristics using a di¤erence-in-di¤erences matching estimator. We \u85nd that \u85rms whose long-term debt was largely maturing right after the third quarter of 2007 cut investment by 2.5 percentage points more (on a quarterly basis) than otherwise similar \u85rms whose debt was scheduled to mature well after 2008. This relative decline in investment is statistically and economically signi\u85cant, representing one-third of pre-crisis investment levels. A number of falsi\u85cation and placebo tests con\u85rm our inferences. For example, in the absence of a credit shock (normal times), the maturity composition of long-term debt has no e¤ect on investment. Likewise, maturity composition has no impact on investment in the crisis for \u85rms for which long-term debt is not a major source of funding. Our analysis highlights the importance of debt maturity for corporate \u85nancial policy. More than showing a general association between credit markets and real activity, our analysis shows how that relation operates through a speci\u85c feature of \u85nancial contracting. Key words: Financial crisis, debt maturity, matching estimators, investment spending, \u85 nancing constraints JEL classi\u85cation: G31 *Our paper bene\u85ted from comments from Fritz Foley and Michael Roberts. We also thank seminar partici