Do firms spread out bond maturity to manage their funding liquidity risk?

We investigate whether and how firms manage their funding liquidity risk by spreading out the maturity of bonds. We find that larger, more leveraged, less profitable, growth-oriented, and non-bank dependent firms exhibit the largest maturity dispersion of outstanding bonds. Such dispersion is maintained by frequently issuing sets of bonds with different maturities. We further find that more bond maturity dispersion results in higher funding availability and lower funding costs. The effects are stronger for firms that face more funding liquidity risk. The evidence suggests that spreading out bond maturities is an effective corporate policy to manage funding liquidity risk.

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