Granularity of corporate debt : [Version 9 Mai 2013]

  • We study to what extent firms spread out their debt maturity dates across time, which we call "granularity of corporate debt." We consider the role of debt granularity using a simple model in which a firm's inability to roll over expiring debt causes inefficiencies, such as costly asset sales or underinvestment. Since multiple small asset sales are less costly than a single large one, firms may diversify debt rollovers across maturity dates. We construct granularity measures using data on corporate bond issuers for the 1991-2011 period and establish a number of novel findings. First, there is substantial variation in granularity in that many firms have either very concentrated or highly dispersed maturity structures. Second, our model's predictions are consistent with observed variation in granularity. Corporate debt maturities are more dispersed for larger and more mature firms, for firms with better investment opportunities, with higher leverage ratios, and with lower levels of current cash flows. We also show that during the recent financial crisis especially firms with valuable investment opportunities implemented more dispersed maturity structures. Finally, granularity plays an important role for bond issuances, because we document that newly issued corporate bond maturities complement pre-existing bond maturity profiles.

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Metadaten
Author:Jaewon Choi, Dirk Hackbarth, Josef ZechnerORCiDGND
URN:urn:nbn:de:hebis:30:3-325039
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2013,26
Series (Serial Number):CFS working paper series (2013, 26)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2013
Year of first Publication:2013
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2013/12/17
Tag:capital structure; debt maturity; debt structure
Issue:Version 9 Mai 2013
HeBIS-PPN:349978247
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht