Ownership structure, control contestability, and corporate debt maturity
The corporate governance literature has shown that self-interested controlling owners tend to divert
corporate resources for private benefits at the expense of other shareholders. Such behavior leads the
controlling owners to prefer long maturity debt to short maturity debt, to avoid frequent monitoring
by lenders, which creates conflict between controlling and minority shareholders over the maturity
structure of debt. In this paper, we examine whether the presence of multiple large shareholders
(MLS), beyond the controlling owner, helps to mitigate this conflict. Using a large data set of French
publicly traded firms during the period 1998–2013, we find strong evidence that firms with MLS
exhibit shorter debt maturity. This result suggests that MLS curb the extraction of private benefits by
the controlling owner and reduce her preference for less monitoring through the use of longer
maturity debt. The findings are robust to a number of checks, including addressing endogeneity
concerns and using alternative sample compositions and alternative regression frameworks.
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This paper investigates the impact of labor protection on corporate debt maturity structure. We hypothesize that stronger labor protection is conducive to a greater use of short-term debt maturity…
The corporate governance literature has shown that self-interested controlling owners tend to divert
corporate resources for private benefits at the expense of other shareholders. Such…