Quotation Chaderina, Maria. 2016. (Idiosyncratic) Credit-spread Risk and the Dynamics of Liquidity, Lever- age and Maturity of Debt.


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Abstract

I study the joint dynamics of leverage, maturity and liquidity choices of a firm. Long-term debt is safer as it limits the firms exposure to roll-over losses driven by credit-spread risk, but short-term debt gives firms more exibility in reducing leverage. As a result, firms have positive cash and debt balances, riskier firms prefer short-term debt, relation between leverage and maturity is positive and maturity structure is imperfectly spread-out. Higher volatility of cash flows makes firms riskier and they opt for shorter-maturity debt, while higher idiosyncratic volatility of credit spreads makes firms chose longer-term borrowing and higher cash balances.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title (Idiosyncratic) Credit-spread Risk and the Dynamics of Liquidity, Lever- age and Maturity of Debt
Year 2016
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2530969

Associations

People
Chaderina, Maria (Former researcher)
Organization
Institute for Finance, Banking and Insurance IN (Details)
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