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)
Authors
- Yunzhi Hu (ORCID: https://orcid.org/0000-0002-4136-771X)
- Felipe Varas
- Chao Ying
Institutions
- University of North Carolina at Chapel Hill (US)
- The University of Texas at Dallas (US)
- University of Hong Kong (HK)
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