• The Korean Journal of Financial Management
• /
• v.22 no.1
• /
• pp.1-36
• /
• 2005

In this study, we analyzed determinant factors of leverage ratio and debt maturity for Korean firms in the simultaneous equation system using 2SLS (two stage least square) method under assumption that two variables are jointly determined in the capital structure decision. As a result of the analysis, we found that leverage ratio and debt maturity are positively related. Also, as for determinant factors of debt maturity, agency cost hypothesis, asset maturity matching hypothesis, signalling and liquidity risk hypothesis are all generally supported, and further leverage ratio are significantly positively related with firm size, but negatively related with default risk. However, when we divided samples into groups according to bank debt level and Chaebul affiliation, with contrast to existing study which worked on similar issues with OLS, we found no evidence supporting the argument that the information asymmetry problem is less severe in firms with more bank debt, whereas information asymmetry and financial constraint problems are more severe in non-Chaebul affiliated firms.