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Autoren: 
König, Philipp
Pothier, David
Datum: 
2014
Reihe/Nr.: 
DIW Discussion Papers 1364
Zusammenfassung: 
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.
Schlagwörter: 
Debt Maturity
Rollover Risk
Asymmetric Information
Global Games
JEL: 
G10
G20
G30
G32
Dokumentart: 
Working Paper
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