Référence

Konstantin Milbradt (Kellogs and NBER), « Dynamic Debt Maturity », Fédération des Banques Françaises Seminar, TSE, 16 mars 2015, 12h30–14h00, salle MF 323.

Résumé

We study a dynamic setting in which a firm chooses its debt maturity structure endogenously over time without commitment. In our model, the firm keeps its promised outstanding bond face-values constant, but can control the firm’s maturity structure via the fraction of newly issued short-term bonds when refinancing its matured long-term and short-term bonds. As a baseline, we show that when the firm’s cash-flows are constant then it is impossible to have the shortening equilibrium in which the firm keeps issuing short-term bonds and default consequently. Instead, when the cash-flows deteriorate over time so that the debt recovery value is affected by the endogenous default timing, then a shortening equilibrium with accelerated default can emerge. Self-enforcing shortening and lengthening equilibria exist, and the shortening equilibrium may be Pareto-dominated by the lengthening one.

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