Arbeitspapier
Asymmetric information and roll-over risk
How do banks choose their debt maturity structure when credit markets are subject to information frictions? This paper proposes a model of equilibrium maturity choice with asymmetric information and endogenous roll-over risk. We show that in the presence of public signals about firms' creditworthiness (credit ratings), firms choose to expose themselves to positive roll-over risk in order to minimize price distortions. Short-term financing is socially desirable when banks' capacity to repay short-term creditors depends on their credit rating, as it helps mitigate the underlying adverse selection problem. Notwithstanding these social benefits, the equilibrium maturity structure always exhibits inefficient short-termism. If banks receiving a credit downgrade face sufficiently high roll-over risk, the equilibrium maturity structure approaches the constrained efficient allocation.
- Sprache
-
Englisch
- Erschienen in
-
Series: DIW Discussion Papers ; No. 1364
- Klassifikation
-
Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Financial Institutions and Services: General
Corporate Finance and Governance: General
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Thema
-
Debt Maturity
Rollover Risk
Asymmetric Information
Global Games
- Ereignis
-
Geistige Schöpfung
- (wer)
-
König, Philipp
Pothier, David
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsches Institut für Wirtschaftsforschung (DIW)
- (wo)
-
Berlin
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- König, Philipp
- Pothier, David
- Deutsches Institut für Wirtschaftsforschung (DIW)
Entstanden
- 2014
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