Skip to main content Accessibility help

Debt Maturity Structure and Credit Quality

  • Radhakrishnan Gopalan (a1), Fenghua Song (a2) and Vijay Yerramilli (a3)

We examine whether a firm’s debt maturity structure affects its credit quality. Consistent with theory, we find that firms with greater exposure to rollover risk (measured by the amount of long-term debt payable within a year relative to assets) have lower credit quality; long-term bonds issued by those firms trade at higher yield spreads, indicating that bond market investors are cognizant of rollover risk arising from a firm’s debt maturity structure. These effects are stronger among firms with a speculative-grade rating and declining profitability, and during recessions.

Hide All
Acharya, V. V.; Gale, D.; and Yorulmazer, T.. “Rollover Risk and Market Freezes.” Journal of Finance, 66 (2011), 11771209.
Almeida, H.; Campello, M.; Laranjeira, B.; and Weisbenner, S.. “Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis.” Critical Finance Review, 1 (2012), 358.
Barclay, M. J., and Smith, C. W.. “The Maturity Structure of Corporate Debt.” Journal of Finance, 50 (1995), 609631.
Berger, A. N.; Espinosa-Vega, M. A.; Frame, W. S.; and Miller, N. H.. “Debt Maturity, Risk, and Asymmetric Information.” Journal of Finance, 60 (2005), 28952923.
Brunnermeier, M. K. “Deciphering the Liquidity and Credit Crunch of 2007–2008.” Journal of Economic Perspectives, 23 (2009), 77100.
Brunnermeier, M. K., and Oehmke, M.. “The Maturity Rat Race.” Journal of Finance, 68 (2013), 483521.
Campbell, J. Y., and Taksler, G. B.. “Equity Volatility and Corporate Bond Yields.” Journal of Finance, 58 (2003), 23212349.
Diamond, D. W. “Debt Maturity Structure and Liquidity Risk.” Quarterly Journal of Economics, 106 (1991), 709737.
Duchin, R.; Ozbas, O.; and Sensoy, B. A.. “Costly External Finance, Corporate Investment, and the Subprime Mortgage Credit Crisis.” Journal of Financial Economics, 97 (2010), 418435.
Fama, E., and French, K. R.. “Industry Costs of Equity.” Journal of Financial Economics, 43 (1997), 153193.
Flannery, M. J. “Asymmetric Information and Risky Debt Maturity Choice.” Journal of Finance, 41 (1986), 1937.
Froot, K. A.; Scharfstein, D. S.; and Stein, J. C.. “Risk Management: Coordinating Corporate Investment and Financing Policies.” Journal of Finance, 48 (1993), 16291658.
Guedes, J., and Opler, T.. “The Determinants of the Maturity of Corporate Debt Issues.” Journal of Finance, 51 (1996), 18091833.
He, Z., and Xiong, W.. “Dynamic Debt Runs.” Review of Financial Studies, 25 (2012a), 17991843.
He, Z., and Xiong, W.. “Rollover Risk and Credit Risk.” Journal of Finance, 67 (2012b), 391429.
Morris, S., and Shin, H. S.. “Illiquidity Component of Credit Risk.” Working Paper, Princeton University (2009).
Sharpe, S. A. “Credit Rationing, Concessionary Lending, and Debt Maturity.” Journal of Banking and Finance, 15 (1991), 581604.
Stohs, M. H., and Mauer, D. C.. “The Determinants of Corporate Debt Maturity Structure.” Journal of Business, 69 (1996), 279312.
Titman, S. “Interest Rate Swaps and Corporate Financing Choices.” Journal of Finance, 47 (1992), 15031516.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed