Abstract

http://ssrn.com/abstract=1966613
 
 

References (43)



 
 

Citations (3)



 


 



Granularity of Corporate Debt


Jaewon Choi


University of Illinois at Urbana-Champaign - Department of Finance

Dirk Hackbarth


Boston University School of Management; University of Illinois at Urbana-Champaign - College of Business

Josef Zechner


Vienna University of Economics and Business

March 10, 2014


Abstract:     
We study the dispersion of debt maturities across time, which we call "granularity of corporate debt,'' using a 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 diversify debt rollovers across maturity dates. We construct granularity measures using data on corporate bond issuers for the 1991-2012 period and establish a number of novel findings. First, there is substantial variation in granularity in that we observe both very concentrated and highly dispersed maturity structures. Second, observed variation in granularity supports the model's predictions, i.e. 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. Third, firms manage granularity actively and adjust toward target levels. Finally, newly issued bond maturities complement pre-existing bond maturity profiles.

Number of Pages in PDF File: 52

Keywords: Capital Structure, Debt Structure, Debt Maturity

JEL Classification: G13, G31, G32, G33

working papers series


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Date posted: November 30, 2011 ; Last revised: March 15, 2014

Suggested Citation

Choi, Jaewon and Hackbarth, Dirk and Zechner, Josef, Granularity of Corporate Debt (March 10, 2014). Available at SSRN: http://ssrn.com/abstract=1966613 or http://dx.doi.org/10.2139/ssrn.1966613

Contact Information

Jaewon Choi
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
Dirk Hackbarth (Contact Author)
Boston University School of Management ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
(617) 358-4206 (Phone)
(617) 353-6667 (Fax)
HOME PAGE: http://people.bu.edu/dhackbar/
University of Illinois at Urbana-Champaign - College of Business ( email )
4035 BIF, MC-520, Box 35
515 East Gregory Drive
Champaign, IL 61820
United States
(217) 333-7343 (Phone)
(217) 244-3102 (Fax)
HOME PAGE: http://business.illinois.edu/dhackbar/
Josef Zechner
Vienna University of Economics and Business ( email )
Heiligenstaedter Strasse 46
Vienna, Wien A-1019
Austria
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