Review of Finance Vol. 24 No. 2 2020
Yield Spreads and the Corporate Bond Rollover Channel
Abstract
I show that the pricing of a bond liquidity shock depends on the current size of a firm’s bond rollover exposure. Using US corporate bond transactions data, I find that a market liquidity shock induces a larger yield spread increase among firms with nonzero rollover exposures. This effect is more pronounced for credit risky firms and increases in the size of the rollover exposure. Furthermore, I show that tests that do not control for the heterogeneity in firms’ rollover exposure policies provide biased estimates of the pricing impact of the rollover channel.
- DOI
- 10.1093/rof/rfz005
- Volume
- 24
- Issue
- 2
- Pages
- 345-379
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref