Does production technology a¤ect a …rm’s debt maturity choice? To address this question, we examine how the factor demands for labor and …xed capital change op-
timal debt maturity choices. Without payback guarantees of principles and interests, creditors seek collaterals for their debt contracts. Yet, they have very restricted ways to secure the fund used for wage payments. Hence, a …rm with substantial wage pay-ments relies more signi…cantly on shorter term debt …nancing, which is relatively free from collateral requirements. Because production technology determines this factor demand for labor and …xed capital, a …rm’s technology plays a critical role in deciding optimal debt maturity policy. Our theory highlights this factor demand channel and predicts a shorter debt maturity structure for labor intensive …rms. Consistent with our predictions, we …nd that labor intensive U.S. manufacturing …rms show shorter debt maturity structures and exercise active short-term debt policies.
