The effects of corporate bond granularity

10 Pages Posted: 19 Aug 2013 Last revised: 23 Dec 2015

See all articles by Lars Norden

Lars Norden

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE); Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Teng Wang

Board of Governors of the Federal Reserve System

Date Written: November 30, 2015

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.

Keywords: Debt finance, bond maturity, rollover risk, issue frequency, cost of capital

JEL Classification: G31, G32, G33, G10

Suggested Citation

Norden, Lars and Roosenboom, Peter and Wang, Teng, The effects of corporate bond granularity (November 30, 2015). Journal of Banking & Finance 63 (2016): 25-34, Available at SSRN: https://ssrn.com/abstract=2311751 or http://dx.doi.org/10.2139/ssrn.2311751

Lars Norden

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE) ( email )

Rua Jornalista Orlando Dantas 30
Rio de Janeiro, 22231-010
Brazil
+552130832431 (Phone)

HOME PAGE: http://www.larsnorden.de

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Teng Wang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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