Yield spreads and the corporate bond rollover channel

I show that the pricing of a bond liquidity shock depends on the current size of a firm's bond rollover exposure. Using U.S. corporate bond transactions data, I find that a market liquidity shock induces a larger yield spread increase among firms with non-zero rollover exposures. This effect is more pronounced for credit risky firms and increases in the size of the rollover exposure. Furthermore, I show that tests that do not control for the heterogeneity in firms' rollover exposure policies provide biased estimates of the pricing impact of the rollover channel.