TY - JOUR AU - Almeida,Heitor AU - Campello,Murillo AU - Laranjeira,Bruno AU - Weisbenner,Scott TI - Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 14990 PY - 2009 Y2 - May 2009 UR - http://www.nber.org/papers/w14990 L1 - http://www.nber.org/papers/w14990.pdf N1 - Author contact info: Heitor Almeida University of Illinois at Urbana-Champaign 515 East Gregory Drive, 4037 BIF Champaign, IL, 61820 Tel: 217/333-2704 E-Mail: halmeida@illinois.edu Murillo Campello Johnson Graduate School of Management Cornell University 114 East Avenue 369 Sage Hall Ithaca, NY 148531-6201 Tel: 607-255-1282 E-Mail: campello@cornell.edu Bruno Laranjeira University of Illinois 1206 South Sixth St. Champaign IL 61820 E-Mail: laranjei@illinois.edu Scott Weisbenner University of Illinois at Urbana-Champaign Department of Finance 340 Wohlers Hall, MC-706 1206 South Sixth Street Champaign, IL 61820 Tel: 217/333-0872 Fax: 217/244-9867 E-Mail: weisbenn@illinois.edu AB - We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like design in which we control for observed and unobserved firm heterogeneity via a differences-in-differences matching estimator. We study whether firms with large portions of their long-term debt maturing right at the time of the crisis observe more pronounced outcomes than otherwise similar firms that need not refinance their debt during the crisis. Firms whose long-term debt was largely maturing right after the third quarter of 2007 reduced investment by 2.5% more (on a quarterly basis) than otherwise similar firms whose debt was scheduled to mature well after 2008. This relative decline in investment is statistically significant and economically large, representing approximately one-third of pre-crisis investment levels. A number of falsification and placebo tests confirm our inferences about the effect of credit supply shocks on corporate policies. For example, in the absence of a credit shock ("normal times"), the maturity composition of long-term debt has no effect on investment outcomes. Likewise, maturity composition has no impact on investment when long-term debt is not a major source of funding for the firm. ER -