TY - JOUR
T1 - Granularity of Corporate Debt
AU - Choi, Jaewon
AU - Hackbarth, Dirk
AU - Zechner, Josef
N1 - Publisher Copyright:
© 2021 Cambridge University Press. All rights reserved.
PY - 2021/6
Y1 - 2021/6
N2 - We study whether firms spread out debt-maturity dates, which we call granularity of corporate debt. In our model, firms that are unable to roll over expiring debt need to liquidate assets. If multiple small asset sales are less inefficient than a single large one, it can be optimal to diversify debt rollovers across time. Using a large sample of corporate bond issuers during the 1991-2012 period, we establish novel stylized facts and evidence consistent with our model's predictions. There is substantial heterogeneity (i.e., firms have both concentrated and dispersed debt structures). Debt maturities are more dispersed for larger and more mature firms and for firms with better investment opportunities, higher leverage, and lower profitability. During the recent financial crisis, firms with valuable investment opportunities implemented more dispersed maturity structures. Finally, firms manage granularity actively and adjust toward target levels.
AB - We study whether firms spread out debt-maturity dates, which we call granularity of corporate debt. In our model, firms that are unable to roll over expiring debt need to liquidate assets. If multiple small asset sales are less inefficient than a single large one, it can be optimal to diversify debt rollovers across time. Using a large sample of corporate bond issuers during the 1991-2012 period, we establish novel stylized facts and evidence consistent with our model's predictions. There is substantial heterogeneity (i.e., firms have both concentrated and dispersed debt structures). Debt maturities are more dispersed for larger and more mature firms and for firms with better investment opportunities, higher leverage, and lower profitability. During the recent financial crisis, firms with valuable investment opportunities implemented more dispersed maturity structures. Finally, firms manage granularity actively and adjust toward target levels.
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U2 - 10.1017/S0022109020000149
DO - 10.1017/S0022109020000149
M3 - Article
AN - SCOPUS:85083203252
SN - 0022-1090
VL - 56
SP - 1127
EP - 1162
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 4
ER -