The At Issue Maturity of Corporate Bonds: The Influence of Credit Rating, Security Level, Duration and Macreoconomic Conditions

Geetanjali Bali and Frank Skinner ()
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Frank Skinner: ICMA Centre, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: We examine the determinants of the at issue time to maturity of corporate bonds. We find evidence that corporations partly determine the at issue maturity of bonds by responding to economic conditions. They also appear to immunize by matching the maturity of assets with the at issue maturity of bonds regardless of credit quality. Finally, we find evidence that the security level (our proxy for the recovery rate) is inversely related to the at issue time to maturity. This suggests that lenders use the promised maturity and security level bond covenants as screening mechanisms to overcome some of the asset substitution and adverse selection problems associated with buying bonds that are subject to credit risk.

Keywords: maturity; credit risk; security level; duration; macroeconomic factors (search for similar items in EconPapers)
JEL-codes: G24 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2003-01
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