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Corporate Debt Structure over the Global Credit Cycle

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Abstract

We study the determinants of active debt management through issuance and refinancing decisions for firms around the world. We leverage instrument-level data to create a comprehensive picture of the maturity, currency, and security type composition of firms' debt for a large cross-section of countries. At the instrument level, we estimate a predictive model of prepayment as a function of interest costs savings and maturity lengthening motives. We document that there is substantial heterogeneity in prepayment across bonds and loans and across firms, depending on their reliance on bank lending. While debt prepayment is generally successful at extending average maturities and lowering interest rate costs at the firm level, these benefits appear smaller for issuers in emerging market economies. Tight global credit conditions reduce both the ability to prepay debt early and the effectiveness of debt refinancing in reducing interest costs and rollover risk. Put together, our results show that the impact of global credit conditions on firms' debt structure can be traced back to how instrument-level prepayment incentives change over the global credit cycle.

Suggested Citation

  • Nina Boyarchenko & Leonardo Elias, 2024. "Corporate Debt Structure over the Global Credit Cycle," Staff Reports 1139, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:99238
    DOI: 10.59576/sr.1139
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    References listed on IDEAS

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    1. Douglas W. Diamond & Zhiguo He, 2014. "A Theory of Debt Maturity: The Long and Short of Debt Overhang," Journal of Finance, American Finance Association, vol. 69(2), pages 719-762, April.
    2. Nina Boyarchenko & Leonardo Elias, 2023. "Corporate Credit Conditions Around the World: Novel Facts Through Holistic Data," Staff Reports 1074, Federal Reserve Bank of New York.
    3. Wenxin Du & Jesse Schreger, 2022. "Sovereign Risk, Currency Risk, and Corporate Balance Sheets," The Review of Financial Studies, Society for Financial Studies, vol. 35(10), pages 4587-4629.
    4. Markus K. Brunnermeier & Motohiro Yogo, 2009. "A Note on Liquidity Risk Management," American Economic Review, American Economic Association, vol. 99(2), pages 578-583, May.
    5. Joshua D. Rauh & Amir Sufi, 2010. "Capital Structure and Debt Structure," The Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4242-4280, December.
    6. Chen, Hui & Xu, Yu & Yang, Jun, 2021. "Systematic risk, debt maturity, and the term structure of credit spreads," Journal of Financial Economics, Elsevier, vol. 139(3), pages 770-799.
    7. Valentina Bruno & Hyun Song Shin, 2017. "Global Dollar Credit and Carry Trades: A Firm-Level Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 30(3), pages 703-749.
    8. Hoyt Bleakley & Kevin Cowan, 2008. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 612-626, November.
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    Cited by:

    1. Alexandra Glazova & Maxim Nevalennyi & Andrey Sinyakov, 2025. "An Educational Model of a Small Open Economy for Monetary Policy Analysis (with examples from Bank of Russia’s practice)," Bank of Russia Working Paper Series wps154, Bank of Russia.
    2. Nitin Nair, 2026. "The Effect of Corporate Cash Accumulation on Monetary Policy Transmission: A Stock-flow Consistent Growth Model," Working Papers PKWP2610, Post Keynesian Economics Society (PKES).

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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