Endogenous Debt Maturity and Rollover Risk

Financial Management, Forthcoming

42 Pages Posted: 15 Jun 2016 Last revised: 22 Aug 2018

See all articles by Emanuele Brancati

Emanuele Brancati

Sapienza University of Rome; IZA Institute of Labor Economics; Sapienza University of Rome - Faculty of Economics

Marco Macchiavelli

Isenberg School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 21, 2018

Abstract

We empirically study the nature of rollover risk and show how banks manage it. Having to roll over debt does not lead to higher default risk per se. Only banks that lose significant access to new funding while having to roll over debt display higher default risk. We identify a factor that determines this build-up of risk: specifically, debt maturity shortening (forcing debt to be more frequently rolled) and reduced access to new funding are both driven by market pessimism about bank's future performance. We also provide evidence consistent with dynamic coordination risk.

Keywords: Banks, Maturity Shortening, Rollover Risk, Debt Issuance, Financial Crisis

JEL Classification: G01, G21, G32

Suggested Citation

Brancati, Emanuele and Macchiavelli, Marco, Endogenous Debt Maturity and Rollover Risk (August 21, 2018). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2795132 or http://dx.doi.org/10.2139/ssrn.2795132

Emanuele Brancati

Sapienza University of Rome ( email )

via Castro del Laurenziano 9
Roma, IA Rome 00191
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Sapienza University of Rome - Faculty of Economics ( email )

Via del Castro Laurenziano 9
Rome, 00161
Italy

Marco Macchiavelli (Contact Author)

Isenberg School of Management ( email )

Amherst, MA 01003
United States

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