Rollover Risk and the Dynamics of Debt

40 Pages Posted: 26 Nov 2014 Last revised: 30 Apr 2018

See all articles by Maria Chaderina

Maria Chaderina

University of Oregon - Lundquist College of Business

Date Written: April 23, 2018

Abstract

I study how firms adjust leverage, maturity and cash to manage rollover risk, and show that time-variation in concentration of maturity dates arises endogenously. To avoid rollover risk, firms prefer long-term debt with dispersed maturity dates. However, severe negative shocks force firms to borrow above an optimal level. They issue short-term debt as a commitment to delever in the next period. This concentrates maturity dates in the next period. The calibrated version of the model matches several empirical facts: more profitable firms have high leverage, use longer maturity bonds and stagger their maturity dates.

Keywords: Rollover Risk, Liquidity Policy, Cash, Maturity Structure, Dynamic Maturity, Dynamic Leverage

JEL Classification: G32, G33

Suggested Citation

Chaderina, Maria, Rollover Risk and the Dynamics of Debt (April 23, 2018). Available at SSRN: https://ssrn.com/abstract=2530969 or http://dx.doi.org/10.2139/ssrn.2530969

Maria Chaderina (Contact Author)

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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