TY  - JOUR
AU  - Greenwood,Robin
AU  - Hanson,Samuel
AU  - Stein,Jeremy C.
TI  - A Gap-Filling Theory of Corporate Debt Maturity Choice
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14087
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14087
L1  - http://www.nber.org/papers/w14087.pdf
N1  - Author contact info:
Robin Greenwood
Harvard Business School
Soldiers Field
Boston, MA 02163
Tel: 617/495-6979
E-Mail: rgreenwood@hbs.edu

Samuel Hanson
Harvard Business School
Soldiers Field Road
Boston, MA 02163
E-Mail: shanson@hbs.edu

Jeremy C. Stein
Department of Economics
Harvard University
Littauer 209
Cambridge, MA  02138
Tel: 617/496-6455
Fax: 617/496-7352
E-Mail: jeremy_stein@harvard.edu
AB  - We argue that time-series variation in the maturity of aggregate corporate debt issues arises because firms behave as macro liquidity providers, absorbing the large supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with relatively more short-term debt, firms fill the resulting gap by issuing more long-term debt, and vice-versa. This type of liquidity provision is undertaken more aggressively: i) in periods when the ratio of government debt to total debt is higher; and ii) by firms with stronger balance sheets. Our theory provides a new perspective on the apparent ability of firms to exploit bond-market return predictability with their financing choices.
ER  -