Rollover risk and corporate bond spreads

Patricio Valenzuela

No 300, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

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.

Date: 2013
New Economics Papers: this item is included in nep-rmg and nep-spo
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Citations: View citations in EconPapers (4)

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Working Paper: Rollover Risk and Corporate Bond Spreads (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:300

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