Starjournal Quotation Dangl, Thomas, Zechner, Josef. 2021. Debt Maturity and the Dynamics of Leverage. Review of Financial Studies. 34 (12), 5796-5840.




This paper shows that short debt maturities commit equityholders to leverage reductions when refinancing expiring debt in low-profitability states. However, shorter maturities lead to higher transactions costs since larger amounts of expiring debt need to be refinanced. We show that this tradeoff between higher expected transactions costs against the commitment to reduce leverage in low-profitability states, motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress and risky cash flows benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt. Empirical evidence supports the model predictions.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
WU Journalrating 2009 A+
Starjournal Y
Language English
Title Debt Maturity and the Dynamics of Leverage
Year 2021
JEL G3, G32


Zechner, Josef (Details)
Dangl, Thomas (Vienna University of Technology, Austria)
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
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