Granularity of Corporate Debt

Jaewon Choi, Dirk Hackbarth, Josef Zechner

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)1127-1162
Number of pages36
JournalJournal of Financial and Quantitative Analysis
Volume56
Issue number4
DOIs
Publication statusPublished - 2021 Jun

Bibliographical note

Publisher Copyright:
© 2021 Cambridge University Press. All rights reserved.

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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