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The effects of corporate bond granularity

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  • Norden, Lars
  • Roosenboom, Peter
  • Wang, Teng

Abstract

We investigate whether and how firms manage their rollover risk by having a dispersed bond maturity structure (granularity). Granularity can be achieved or maintained by frequently issuing sets of bonds with different maturities. We find that firms with higher granularity have higher availability of financing, lower cost of financing, lower financial constraints and lower stock return volatility. The effects are stronger for firms that face higher rollover risk. The evidence suggests that spreading out bond maturities is an effective corporate policy to manage rollover risk.

Suggested Citation

  • Norden, Lars & Roosenboom, Peter & Wang, Teng, 2016. "The effects of corporate bond granularity," Journal of Banking & Finance, Elsevier, vol. 63(C), pages 25-34.
    • Handle: RePEc:eee:jbfina:v:63:y:2016:i:c:p:25-34
    DOI: 10.1016/j.jbankfin.2015.11.001
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    More about this item

    Keywords

    Debt finance; Bond maturity; Rollover risk; Issue frequency; Cost of capital;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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