The At Issue Maturity of Corporate Bonds: The Influence of Credit Rating, Security Level, Duration and Macreoconomic Conditions
AbstractWe examine the determinants of the at issue time to maturity of corporate bonds. We find evidence that corporations partly determine the at issue maturity of bonds by responding to economic conditions. They also appear to immunize by matching the maturity of assets with the at issue maturity of bonds regardless of credit quality. Finally, we find evidence that the security level (our proxy for the recovery rate) is inversely related to the at issue time to maturity. This suggests that lenders use the promised maturity and security level bond covenants as screening mechanisms to overcome some of the asset substitution and adverse selection problems associated with buying bonds that are subject to credit risk.
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Bibliographic InfoPaper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2003-01.
Length: 31 pages
Date of creation: Jan 2003
Date of revision:
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More information through EDIRC
maturity; credit risk; security level; duration; macroeconomic factors;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
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