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Cash Flows and Debt Maturity

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  • Gautam Goswami
  • Michael Rebello
  • Thomas Noe

Abstract

In an asymmetric information framework, a number of authors have demonstrated the existence and uniqueness of short‐term debt pooling equilibria in the absence of dissipative costs. We show that short‐term debt pooling is robust to a broad range of deviations from stationarity and intertemporal independence. However, with intertemporal dependence, separating equilibria exist in which short‐term debt signals favourable information. Non‐stationary allows for separating equilibria in which long‐term debt signals favourable information. A range of deviations from stationarity and intertemporal independence also support long‐term debt pooling equilibria.

Suggested Citation

  • Gautam Goswami & Michael Rebello & Thomas Noe, 1997. "Cash Flows and Debt Maturity," Economica, London School of Economics and Political Science, vol. 64(254), pages 303-316, May.
    • Handle: RePEc:bla:econom:v:64:y:1997:i:254:p:303-316
    DOI: 10.1111/1468-0335.00079
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