Many US corporate bonds are callable at a predetermined, fixed price. Callability gives firms the ability to re-price their bonds ex-post. It is less clear how it resolves ex-ante contracting frictions. We show empirically that longer maturity and lower credit quality bonds are frequently issued...

We study a model in which future financing constraints leas firms to have a preference for investments with sorter payback periods, investments with less risk, and investments that utilize more pledgeable assets. The model also shows how investment distortions towards more liquid, safer assets...