Dangl, Thomas, Zechner, Josef. 2021. Debt Maturity and the Dynamics of Leverage. Review of Financial Studies.
BibTeX
Abstract
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.
Tags
Press 'enter' for creating the tagPublication's profile
Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Review of Financial Studies |
Citation Index | SSCI |
WU Journalrating 2009 | A+ |
Starjournal | Y |
Language | English |
Title | Debt Maturity and the Dynamics of Leverage |
Year | 2021 |
Reviewed? | Y |
URL | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=890228 |
DOI | http://dx.doi.org/10.1093/rfs/hhaa148 |
Open Access | Y |
Open Access Link | https://watermark.silverchair.com/hhaa148.pdf?token=AQECAHi208BE49Ooan9kkhW_Ercy7Dm3ZL_9Cf3qfKAc485ysgAAArQwggKwBgkqhkiG9w0BBwagggKhMIICnQIBADCCApYGCS |
JEL | G3, G32 |
Associations
- People
- Zechner, Josef (Details)
- External
- Dangl, Thomas (Vienna University of Technology, Austria)
- Organization
- Institute for Finance, Banking and Insurance IN (Details)
- Research Institute for Capital Markets FI (Details)