Managerial Ownership and Corporate Debt Maturity: Evidence from BIST-100 Firms

Abstract

We examine the relation between managerial ownership and corporate debt maturity for the firms listed in Borsa Istanbul-100 Index (BIST-100) between the period 2005 and 2013. We find a negative relation between managerial ownership and long term debt maturity. This finding is in line with the agency cost theory which states that ownership of managers’ results in the interest alignments of managers with shareholders. Monitoring the easing function of short term debt makes it preferable for shareholders’ interests. We also find evidence for managerial entrenchment effect by reporting a long term debt maturity choices of entrenched managers. We measure entrenchment by adding quadratic form of ownership in our model. Finally, we find that as firms gets more financially strong, they prefer short term debt if they have managerial ownership.