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This papers studies the optimal choice of sovereign debt maturity when investors are unaware of the government … priced in debt, and the size of this wedge differs with the maturity of debt. Long-term debt becomes less attractive for safe … with a shorter maturity profile – relative to the optimal choice under perfect information – and risky borrowers mimic the …
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Information about credit quality is uncertain and varies across debt maturity. We show that an ambiguity-averse firm … manager will avoid maturities with ambiguous credit information. We thus hypothesize that firms choose maturity structures …
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