TY - JOUR
T1 - Kicking maturity down the road
T2 - Early refinancing and maturity management in the corporate bond market
AU - Xu, Qiping
N1 - I thank my advisors Douglas Diamond, Zhiguo He, Anil Kashyap, Gregor Matvos, and Amir Sufi for their invaluable input and the editor, Philip Strahan, for insightful comments. I would also like to thank Taylor Begley, Andras Danis, Stephen Kaplan, Kelly Shue, Michael Weisbach, Eric Zwick, and two anonymous referees, as well as seminar participants at the University of Chicago, the Fama Miller corporate finance reading group, the London Business School Trans-Atlantic Doctoral Conference, Cheung Kong Graduate School of Business, Hong Kong University of Science and Technology, University of Hong Kong, Georgia Institute of Technology, University of Notre Dame, University of Colorado at Boulder, 2015 EFA conference, and 2016 AFA conference. Research support from the Deutsche Bank, Bradley Foundation, and the John and Serena Liew Fellowship Fund at the Fama-Miller Center for Research in Finance, University of Chicago Booth School of Business is gratefully acknowledged. Send correspondence to Qiping Xu, 223 Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556; telephone (574) 631-3886. E-mail: [email protected].
PY - 2018/8/1
Y1 - 2018/8/1
N2 - 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.
AB - 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.
KW - Maturity Management
KW - Refinancing Risk
KW - Early Refinancing
KW - Corporate Bond
UR - https://www.scopus.com/pages/publications/85056368724
UR - https://www.scopus.com/pages/publications/85056368724#tab=citedBy
U2 - 10.1093/rfs/hhx116
DO - 10.1093/rfs/hhx116
M3 - Article
AN - SCOPUS:85056368724
SN - 0893-9454
VL - 31
SP - 3061
EP - 3097
JO - Review of Financial Studies
JF - Review of Financial Studies
IS - 8
ER -