Debt refinancing and credit risk

Santiago Forte, Juan Ignacio Peña

Producció científica: Article en revista indexadaArticleAvaluat per experts

4 Cites (Scopus)


Many firms choose to refinance their debt. We investigate the long run effects of this extended practice on credit ratings and credit spreads. We find that debt refinancing generates systematic rating downgrades unless a minimum firm value growth is observed. Deviations from this growth path imply asymmetric results. A lower firm value growth generates downgrades and a higher firm value growth generates upgrades, as expected. However, downgrades tend to be higher in absolute terms. We also find that the inverse relation between credit spreads and risk free rate that structural models usually predict still holds in this setting, but only in the short run. This negative relation will turn to be null in the medium run and positive in the long run.

Idioma originalAnglès
Pàgines (de-a)1-10
Nombre de pàgines10
RevistaSpanish Review of Financial Economics
Estat de la publicacióPublicada - de gen. 2011
Publicat externament


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