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Debt Maturity and Asymmetric Information: Evidence from Default Risk Changes

Asymmetric information models suggest that a borrower's choice of debt maturity depends on its private information about its default probabilities, i.e., borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this implication by tracing the evolution of debt issuers' default risk following debt issuances. We find that short-term debt issuance leads to a decline in borrowers' asset volatility and an increase in their distance-to-default. The opposite is true for long-term debt issues. The results suggest that borrowers' private information about their default risk is an important determinant of their debt maturity choices..Printed Journal

Ketersediaan

Call NumberLocationAvailable
JFQA4803PSB lt.dasar - Pascasarjana1
Penerbit Cambridge Cambridge University Press.,
Edisi -
Subjek Default
to
Signaling
Default Risk
Debt maturity
Distance
timing
Debt Issuance
Asset Volatility
ISBN/ISSN -
Klasifikasi -
Deskripsi Fisik -
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