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Comment: “The Dynamics of Corporate Debt Management, Decision Rules, and Some Empirical Evidence”

Published online by Cambridge University Press:  19 October 2009

Rashmi B. Thakkar
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Extract

In a previous issue of this journal Boot and Frankfurter (hereafter B-F) published the results of their study on the optimal mix of short-and-long-term debt. While interesting, their results appear to be open to question on the following grounds:

1. Use of wrong data: The short-term borrowing data used by B-F in their regression analysis include the following items which do not generally and, rightly so, belong to short-term debt:

(a) Reserve for deferred or future income taxes,

(b) Restricted surplus for deferred taxes,

(c) Insurance reserves,

(d) Surplus reserves,

(e) Unamortised debt premium, and

(f) Contributions for constructions.

Type
Communications
Information
Journal of Financial and Quantitative Analysis , Volume 9 , Issue 6 , December 1974 , pp. 1065 - 1066
Copyright
Copyright © School of Business Administration, University of Washington 1974

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References

1 John C. G. Boot and George M. Frankfurter, “The Dynamics of Corporate Debt Management, Decision Rules, and Some Empirical Evidence” (September 1972), pp. 1957–1965.

2 Frankfurter, George M., “The Dynamics of Corporate Debt Management” (Ph.D. Thesis, State University of Mew York at Buffalo, 1970)Google Scholar.

3 Kuznets, S.. “Capital in the American Economy—Its Formation and Financing” (Princeton University Press, 1961)Google Scholar.