Add to ORKGAbstract. In a dynamic framework this paper studies how a firm chooses the optimal amount and maturity of its debt. The dynamic debt policy is determined as a trade-off between tax advantages, bankruptcy costs and costs of recapitalizing the firm. The main contribution is to examine the optimal debt maturity in a dynamic setting where the firm’s capital is op-timally reorganized following a bankruptcy or when old debt expires. Our results highlight the importance of including debt maturity in the optimal capital structure. We show that firms choose to issue short term debt when restructuring debt is cheap, bankruptcy costs are low, or the uncertainty in the firm’s cash flow is either high or low. We also extend the model to include callable...