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The short term debt vs. long term debt puzzle: a model for the optimal mix

Moro, Andrea; Lucas, Michael; Bazzanella, Claudio and Grassi, Edo (2009). The short term debt vs. long term debt puzzle: a model for the optimal mix. In: 5th Conference on Performance Measurement and Management Control, 23-25 September 2009, Nice, France.

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Abstract

This paper argues that the existing finance literature is inadequate with respect to its coverage of capital structure of small and medium sized enterprises (SMEs). In particular it is argued that the cost of equity (being both conceptually ill defined and empirically non quantifiable) is not applicable to the capital structure decisions for a large proportion of SMEs and the optimal capital structure depends only on the mix of short and long term debt. The paper then presents a model, developed by practitioners for optimising the debt mix and demonstrates its practical application using an Italian firm's debt structure as a case study.

Item Type: Conference Item
Copyright Holders: 2009 The Authors
Keywords: capital structure; equity; short-term debt; long-term debt;
Academic Unit/Department: Open University Business School
Item ID: 18587
Depositing User: Andre Moro
Date Deposited: 19 Oct 2009 10:33
Last Modified: 24 Oct 2012 07:29
URI: http://oro.open.ac.uk/id/eprint/18587
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