| Summary: | This paper studies debt maturity management through early refinancing, in which firms simultaneously retire their outstanding bonds before the scheduled due date and issue new bonds as replacements. Speculative-grade firms frequently refinance early to extend the maturity of their outstanding bonds. This pattern is strongest when credit supply conditions are more accommodating, resulting in a procyclical debt maturity structure for speculative-grade firms. In contrast, investment-grade firms do not manage their maturity similarly. This difference has real consequences. Early refinancing and maturity extension allow speculative-grade firms to invest more, while investment-grade firms show no response of investment to early refinancing. I exploit the timing of the protection period of callable bonds to show that the effect of early refinancing on maturity and investment is not driven by unobservable firm characteristics or interest-rate conditions. The evidence is consistent with precautionary maturity management, in which speculative-grade firms extend maturity to hedge against refinancing risk caused by credit supply fluctuations. Longer maturity reduces the possibility of being forced to refinance during credit market downturns, allowing firms more flexibility to invest.
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