Yield Spreads and the Corporate Bond Rollover Channel

Florian Nagler

Review of Finance, 2020, vol. 24, issue 2, 345-379

Abstract: I show that the pricing of a bond liquidity shock depends on the current size of a firm’s bond rollover exposure. Using US corporate bond transactions data, I find that a market liquidity shock induces a larger yield spread increase among firms with nonzero rollover exposures. This effect is more pronounced for credit risky firms and increases in the size of the rollover exposure. Furthermore, I show that tests that do not control for the heterogeneity in firms’ rollover exposure policies provide biased estimates of the pricing impact of the rollover channel.

Keywords: Corporate bonds; Yield spread; Liquidity; Rollover risk; Debt structure (search for similar items in EconPapers)
JEL-codes: G12 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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