Rollover risk and credit risk
By: Zhiguo He, Wei Xiong.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15653; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15653.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders.  When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of paying off the maturing debt.  Our model shows that both deteriorating market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher fundamental thresholds.  Our model provides implications on liquidity-spillover effects, the flight-to-quality phenomenon, and optimal debt maturity structures"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 2/23/2010.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.