Risk Shifting versus Risk Management in Debt Rollover

53 Pages Posted: 25 Aug 2013 Last revised: 26 Feb 2016

See all articles by Bo Li

Bo Li

Tsinghua University - PBC School of Finance

Date Written: February 19, 2016


Does risk shifting incentives or risk management incentives dominate when firms rollover large amounts of maturing debt? The empirical evidence supports the risk management hypothesis by identifying a hump-shaped relation between long-term debt maturity and firm risk. Using difference-in-differences approach that relies on the ex-ante variation in long-term debt at the onset of the crisis of 2007, I find that firms with greater exposure to rollover risk increase R&D intensive investments. This paper high-light that the incentive to avoid financial distress plays a significant role in explaining the riskiness of investments.

Keywords: Debt heterogeneity; Market liquidity, Refinancing risk; Risk management

JEL Classification: G01, G11, G21, G31, G32

Suggested Citation

Li, Bo, Risk Shifting versus Risk Management in Debt Rollover (February 19, 2016). PBCSF-NIFR Research Paper No. 13-02, Available at SSRN: https://ssrn.com/abstract=2315449 or http://dx.doi.org/10.2139/ssrn.2315449

Bo Li (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
+86 10-627982146 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics