Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2018:33: Refinancing Risk and Debt Maturity Choice during a Financial Crisis

Alemu Tulu Chala ()
Additional contact information
Alemu Tulu Chala: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper explores whether refinancing risk is an important determinant of maturity decisions by investigating how firms with refinancing risk choose the maturity of new loans they obtain during the 2007-2009 financial crisis. The firms' refinancing risk is measured by the maturing portion of outstanding long-term debt. The result shows that firms with a high refinancing risk choose longer maturities. This effect is stronger for speculative-grade and low-cash-flow firms. There is also evidence that firms with refinancing risk obtain longer maturities from their relationship lenders.

Keywords: Refinancing risk; Debt maturity; financial crisis

JEL-codes: G01; G32; G39

39 pages, November 13, 2018

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