Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 7, 2022 erstellt
Description:
We examine how debt rollover risk affects firms' capital structure following aggregate economic shocks. Using the COVID-19 shock and a text-based measure of earnings calls, we find firms increase leverage by 7.4 percentage points when they are highly exposed to both rollover risk as well as fundamental profitability shocks compared to less exposed firms. Higher exposure to both risks, consequently, leads to significantly diminished distance to default. We show the capital structure change cannot be explained by the pecking-order theory, but is consistent with trade-off theory with partial adjustment towards target leverage due to debt adjustment costs. Overall, we quantify the importance of an unexplored channel that affects capital structure