Debt Structure, Rollover Risk, and Payout Policy
42 Pages Posted: 27 Nov 2020
Date Written: October 1, 2020
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: Suggested Citation