Abstract

http://ssrn.com/abstract=891300
 
 

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Corporate Boards and the Leverage and Debt Maturity Choices


Jarrad Harford


University of Washington

Kai Li


University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Xinlei Shelly Zhao


Office of the Currency Comptroller - Risk Analysis Division; Kent State University - Department of Finance

February 2007


Abstract:     
Debt, and in particular, short-term debt have the potential to discipline managers. We examine the role of the board in making financing decisions that provide this discipline. Specifically, given a firm's characteristics, we predict that stronger boards will force the firm to hold more debt and more short-term debt. Employing a rich dataset of board characteristics and controlling for other aspects of a firm's corporate governance, we find support for these hypotheses. Our simple measure of director power is a robust and promising measure of internal governance.

Number of Pages in PDF File: 36

Keywords: leverage, debt maturity, board effectiveness, incentive alignment, director power, governance

JEL Classification: G32, G34

working papers series





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Date posted: March 16, 2006  

Suggested Citation

Harford, Jarrad and Li, Kai and Zhao, Xinlei Shelly, Corporate Boards and the Leverage and Debt Maturity Choices (February 2007). Available at SSRN: http://ssrn.com/abstract=891300 or http://dx.doi.org/10.2139/ssrn.891300

Contact Information

Jarrad Harford (Contact Author)
University of Washington ( email )
Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)
HOME PAGE: http://faculty.washington.edu/jarrad/
Kai Li
University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)
HOME PAGE: http://finance.sauder.ubc.ca/~kaili
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Xinlei Zhao
Office of the Currency Comptroller - Risk Analysis Division ( email )
250 E Street, SW
Washington, DC 20219
United States
Kent State University - Department of Finance ( email )
College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States
330-672-1213 (Phone)
330-672-9806 (Fax)
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