Debt Maturity Management

Abstract This paper studies how a borrower issues long- and short-term debt in response to shocks to the fundamental value. Short-term debt protects creditors from future dilution and incentivizes the borrower to reduce leverage after small negative shocks. Long-term debt postpones default and allows the borrower time to recover after large negative shocks. When borrowers are in distress, they rely on short-term debt; however, they issue both types of debt during more normal periods. Our model generates novel implications for the dynamic adjustment of debt maturities. (JEL G32, G33)

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Publication Details

Journal
Review of Financial Studies
Published
2026-03-21
DOI
https://doi.org/10.1093/rfs/hhag007
Primary Topic
Credit Risk and Financial Regulations
Type
article
Field-Weighted Citation Impact
0.00
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article

Debt Maturity Management

Yunzhi Hu, Felipe Varas, Chao Ying
Review of Financial Studies
Credit Risk and Financial Regulations
article

Debt Maturity Management

Yunzhi Hu, Felipe Varas, Chao Ying
article en

Abstract

Abstract This paper studies how a borrower issues long- and short-term debt in response to shocks to the fundamental value. Short-term debt protects creditors from future dilution and incentivizes the borrower to reduce leverage after small negative shocks. Long-term debt postpones default and allows the borrower time to recover after large negative shocks. When borrowers are in distress, they rely on short-term debt; however, they issue both types of debt during more normal periods. Our model generates novel implications for the dynamic adjustment of debt maturities. (JEL G32, G33)

Review of Financial Studies
University of North Carolina at Chapel Hill (US), The University of Texas at Dallas (US), University of Hong Kong (HK)
Decent work and economic growth
Openalex Percentile: Top 12%
Credit Risk and Financial Regulations
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