Huang, Chong, Oehmke, Martin and Zhong, Hongda (2018) A theory of multi-period debt structure. Review of Financial Studies. ISSN 0893-9454 (In Press)
![]() |
Text
- Accepted Version
Pending embargo until 31 December 2099. Download (868kB) | Request a copy |
Abstract
We develop a theory of multi-period debt structure. A simple trade-off between the termination threat required to make repayments incentive compatible and the desire to avoid early liquidation determines the number of repayments, their timing, and repayment amounts. As firms increase their borrowing, they add periodic risky repayments from the back of the maturity structure, with the time between repayments increasing in cash-flow risk. Cash-flow growth or a significant risk-free cash-flow component limit the number of periodic risky repayments. Firms with significant risk-free cash-flow component choose dispersed maturity profiles with relatively safe repayments every period, rather than riskier, periodic repayments.
Item Type: | Article |
---|---|
Official URL: | https://academic.oup.com/rfs |
Additional Information: | © 2018 Oxford University Press |
Divisions: | Finance |
Subjects: | H Social Sciences > HG Finance |
Sets: | Departments > Finance |
Date Deposited: | 16 Oct 2018 13:13 |
Last Modified: | 23 Jan 2019 21:00 |
URI: | http://eprints.lse.ac.uk/id/eprint/90429 |
Actions (login required)
![]() |
View Item |