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

See all articles by Qiping Xu

Qiping Xu

University of Illinois Urbana Champaign

Date Written: October 4, 2017

Abstract

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

Xu, Qiping, Kicking Maturity Down the Road: Early Refinancing and Maturity Management in the Corporate Bond Market (October 4, 2017). Available at SSRN: https://ssrn.com/abstract=2787968 or http://dx.doi.org/10.2139/ssrn.2787968

Qiping Xu (Contact Author)

University of Illinois Urbana Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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