Large net loan charge-offs are frequently associated with large decreases in nonperforming loans and large increases in loan loss provisions, inducing a V-shaped relation between loan loss provisions and nonperforming loan changes. Failure to model the asymmetry attributable to net loan charge-offs can change inferences about the presence of earnings management and the effects of delayed loan loss recognition in prior papers that assumed linearity. Future researchers should either include net loan charge-offs in linear models of loan loss provisions or explicitly model the asymmetry induced by omitting net loan charge-offs.

This study explores the extent to which a firm's debt maturity structure affects the cost of bank loans. By examining the U.S. syndicated loans from 1990 and 2014, we find that debt maturity structure is a major determinant of loan spreads, after accounting for firm- and loan-specific variables and firm and year fixed effects. A one standard deviation increase in the ratio of short-term debt to total assets is associated with an increase of 11.44 basis points in loan spread, representing an additional $0.644 million in interest expenses. The results support the rollover risk hypothesis, which predicts that short-term debts intensify the shareholder and bondholder conflicts and lead to greater credit risk. In addition, high-growth firms experience significantly smaller increases in their loan spreads than low-growth firms when the short-term debt ratio increases. This finding is consistent with the asset substitution theory that short-term debt mitigates the managerial/shareholders’ risk-taking incentives, leading to a decrease in firm risk. Our results remain strong when we use alternative short-term debt proxies, address endogeneity concerns, and perform various robustness tests.