On the Relevance of Ownership Structure in Determining the Maturity of Debt

Abstract

I investigate whether ownership by blockholders is an important determinant of corporate debt maturity. Using GMM methodology to control for the endogeneity of all regressors, I document an economically significant negative link between short term debt and ownership by blockholders. This suggests that, in trading off costs and benefits of short term debt, less diversified shareholders are more concerned about liquidity risk than underinvestment costs. Additionally, I report strong evidence that the link with insider ownership is non-linear. Finally, I find a negative relation between short term debt and board structure which indicates that these are alternative agency control mechanisms.

Keywords: debt maturity, ownership structure, corporate governance, endogeneity, GMM

JEL Classification: G32, G34