Rollover Risk and Corporate Bond Spreads

Patricio Valenzuela

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: Using a new data set on corporate bonds placed in international markets by advanced and emerging market borrowers, this paper demonstrates that the impact of debt market illiquidity on corporate bond spreads is exacerbated with a higher proportion of short-term debt. This effect is stronger in speculative-grade bonds and is smaller in the banking sector as banks may have the support of a lender of last resort in times of debt market illiquidity. The paper's major finding is consistent with the predictions of structural credit risk models that argue that a higher proportion of short-term debt increases the firm's exposure to debt market illiquidity through a 'rollover risk' channel.

JEL-codes: G12 G13 G15 G32 G33 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Working Paper: Rollover risk and corporate bond spreads (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:upafin:13-10

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