Our model shows that deterioration of debt market liquidity not only leads to an increase in liquidity premium of corporate bonds but also credit risk. The latter effect originates from firms' debt rollover. When liquidity deterioration causes a firm to suffer losses in rolling over its maturing...

How do opacity and disclosure policies impact the likelihood of debt runs and economicefficiency? I construct a dynamic model where debt yields are endogenous and mappedexplicitly to the degree of transparency, the regulatory disclosure regime and the stateof the economy. I find that: opacity is...

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of...

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of...