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The At Issue Maturity of Corporate Bonds: The Influence of Credit Rating, Security Level, Duration and Macreoconomic Conditions

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  • Geetajali Bali

    (ICMA Centre, University of Reading)

  • Frank Skinner

    (ICMA Centre, University of Reading)

Abstract

We 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.

Suggested Citation

  • Geetajali Bali & Frank Skinner, 2003. "The At Issue Maturity of Corporate Bonds: The Influence of Credit Rating, Security Level, Duration and Macreoconomic Conditions," ICMA Centre Discussion Papers in Finance icma-dp2003-01, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2003-01
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    File URL: http://www.icmacentre.ac.uk/pdf/discussion/DP2003-01.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    maturity; credit risk; security level; duration; macroeconomic factors;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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