OPTIMAL MATURITY STRUCTURE WITH MULTIPLE DEBT CLAIMS

This paper provides an explanation for why firms may choose to simulta neously issue multiple debt claims with varying maturities. The optima l mix of short- and long-term debt allows the firm to precommit to a m ore efficient liquidation policy. Even in risk-neutral settings, the o ptimal mix hinges critically on the mean and the variability of the fi rm's liquidation value. Determining the optimal mix of debt is more co mplex than just weighing the costs of issuing short- or long-term debt exclusively. The implications of alternate priority structures, infor mational settings, interest rate uncertainty, and maturity matching st rategies are also considered.