
This article develops a model in which optimal capital structure and debt maturity are jointly determined in a stochastic interest rate environment. The model yields leverage ratios that are consistent in spirit with empirical observations. The optimal maturity and credit spread of an optimally issued debt are found to be smaller than observed values. The long‐run mean of the interest rate is found to be a key variable in determining optimal capital structure and debt maturity. Furthermore, the interest rate volatility and the correlation between the interest rate and the firm’s asset value play important roles in determining debt maturity.
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 37 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Top 10% | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 10% | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Average |
