Kicking Maturity Down the Road: Early Refinancing and Maturity Management in the Corporate Bond Market
54 Pages Posted: 2 Jun 2016 Last revised: 2 Mar 2018
Date Written: October 4, 2017
This paper examines debt maturity management through early refinancing, where firms retire their outstanding bonds before the due date and simultaneously issue new ones as replacements. Speculative-grade firms frequently refinance their corporate bonds early to extend maturity, particularly under accommodating credit supply conditions, leading to a procyclical maturity structure. In contrast, investment-grade firms do not manage their maturity in the same manner. I exploit the protection period of callable bonds to show that the maturity extension is not driven by unobservable confounding factors. The evidence is consistent with speculative-grade firms dynamically managing maturity to mitigate refinancing risk.
Keywords: Maturity Management, Refinancing Risk, Early Refinancing, Corporate Bond
JEL Classification: G39
Suggested Citation: Suggested Citation