I develop a dynamic capital structure model in which shareholders determine a firm's leverage ratio, debt maturity, and … all the firm's cash flows and can pick a new capital structure. The possibility to alter the capital structure at maturity … gives shareholders the incentive to issue finite maturity debt and allows me to study firms' joint choice of leverage and …

When firms roll over bonds of different maturity, their debt-maturity structure can feature both shorter and longer … maturity in bad times. We link these debt-maturity patterns to the firms' fundamentals, assuming earnings are deterministically … via longer maturity. By contrast, the fraction of newly issued short-term debt is (weakly) procyclical in all paths. That …