TY  - UNPD
A1  - Dangl, Thomas
A1  - Zechner, Josef
T1  - Debt maturity and the dynamics of leverage
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 547
N2  - This paper shows that long debt maturities eliminate equity holders’ incentives to reduce leverage when the firm performs poorly. By contrast, short debt maturities commit equity holders to such leverage reductions. However, shorter debt maturities also lead to higher transactions costs when maturing bonds must be refinanced. We show that this tradeoff between higher expected transactions costs against the commitment to reduce leverage when the firm is doing poorly motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt.
T3  - CFS working paper series - 547 
KW  - debt maturity
KW  - optimal capital structure choice
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/41866
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-418664
UR  - https://ssrn.com/abstract=2858756
N1  - A previous version of this paper was circulated under the title “Voluntary Debt Reductions”.
IS  - June 15, 2016
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -