I develop a dynamic model of financing decisions and optimal debt maturity choice in which creditors face adverse …-leverage firms eventually decide to issue debt. Because shorter maturity debt is less sensitive to information, younger firms issue … shorter maturity debt to alleviate adverse selection while mature firms issue longer maturity debt, leading to a life …

creditors losing faith in the long-run prospects of the bank, hence forcing it to shorten its debt maturity. Finally, we build a … model that endogenizes the debt maturity structure and predicts that worse market expectations lead to a maturity shortening …