TY - JOUR
T1 - Debt maturity structure and credit quality
AU - Gopalan, Radhakrishnan
AU - Song, Fenghua
AU - Yerramilli, Vijay
N1 - Publisher Copyright:
© 2015 Michael G. Foster School of Business, University of Washington.
PY - 2014/8/5
Y1 - 2014/8/5
N2 - 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.
AB - 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.
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U2 - 10.1017/S0022109014000520
DO - 10.1017/S0022109014000520
M3 - Article
AN - SCOPUS:84921838103
SN - 0022-1090
VL - 49
SP - 817
EP - 842
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 4
ER -