Debt Structure, Rollover Risk, and Payout Policy

42 Pages Posted: 27 Nov 2020 Last revised: 13 Jan 2022

See all articles by Hiromichi Iwaki

Hiromichi Iwaki

Kanagawa University, Faculty of Economics

Junyu Saito

MomoyamaGakuin University

Date Written: October 1, 2020

Abstract

This paper examines the effects of the rollover risk of debt on firms’ payout policies, taking into account differences in the structure of debt. The results show that in the face of rollover risk, firms decrease dividends; in addition, they decrease the total payout given to shareholders including stock repurchases. However, these results only hold for the bank-dependent firms, not for firms with public debt. We find that the relationships between rollover risk and payout policy become weak for firms without any financing constraints. Our results imply that firms’ payout policies can be attenuated when firms facing financial constraints need more financial flexibility.

Keywords: debt structures, rollover risk, payout policy, financing constraints

JEL Classification: G31; G35

Suggested Citation

Iwaki, Hiromichi and Saito, Junyu, Debt Structure, Rollover Risk, and Payout Policy (October 1, 2020). Journal of Economics and Business, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3709652 or http://dx.doi.org/10.2139/ssrn.3709652

Hiromichi Iwaki

Kanagawa University, Faculty of Economics ( email )

3-27-1 Rokkakubashi, Kanagawa-ku
Yokohama, Kanagawa 221-8686
Japan

HOME PAGE: http://https://hiromichiiwaki.wixsite.com/personal

Junyu Saito (Contact Author)

MomoyamaGakuin University ( email )

1-1 Manabino
Izumi, Osaka 594-1198
Japan
+81-725-54-3131 (Phone)

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