August 2, 2022
Jakub Hajda won the Best Paper Award for a conference paper on corporate financing cycles. The assistant professor from HEC Montréal’s Department of Finance and the 3 co-authors of this research received this award at the annual conference of the French Finance Association (AFFI) in Saint-Malo, last May.
Entitled Financing Cycles, this paper is the result of the work carried out by an international team of corporate finance specialists:
Capital ages and must eventually be replaced. The authors propose a theory of financing in which firms finance new capital with debt and optimally deleverage to free up debt capacity as their capital ages, thereby generating debt cycles. Concurrently, firms shorten the maturity of their debt to match the remaining life of their capital, generating maturity cycles. The paper provides empirical evidence that strongly supports these predictions and highlights the key roles of capital age in financing cycles.