Optimal debt maturity and firm investment

We introduce long-term debt and a maturity choice into dynamic model of production, firm financing, costly default. Long-term saves roll-over costs but increases future leverage default rates because commitment problem. The generates rich distributions choices, ratios, credit spreads across firms. It explains why larger older firms borrow at longer maturities, have higher leverage, pay lower spreads. Firms' matters for policy: A financial reform which investment output in standard short-term can the opposite effect with debt.