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Corporate Debt Maturity and Monitoring by Institutional Investors

Maria-Teresa Marchica

University of Manchester - Manchester Business School

December 30, 2011

I provide novel evidence that institutional investors, by influencing the maturity structure of corporate debt, play an active monitoring role. First, I find that institutional ownership is positively related to short-term debt and this relationship is not only statistically significant, but also economically sizeable. Second, I show that longer investment horizons and absence of potential business relations with the firm provide investors with stronger incentives to monitor managers by increasing the proportion of short-term debt in the company. This monitoring role is corroborated by robustness tests which reveal an increased probability of issuing short-term debt following a change in investor characteristics.

Number of Pages in PDF File: 62

Keywords: Institutional Investors, Monitoring, Debt Maturity Structure

JEL Classification: G32, G34

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Date posted: March 8, 2011 ; Last revised: January 4, 2012

Suggested Citation

Marchica, Maria-Teresa, Corporate Debt Maturity and Monitoring by Institutional Investors (December 30, 2011). Available at SSRN: https://ssrn.com/abstract=1781239 or http://dx.doi.org/10.2139/ssrn.1781239

Contact Information

Maria-Teresa Marchica (Contact Author)
University of Manchester - Manchester Business School ( email )
Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
+44(0)1612750121 (Phone)
+44(0)1612754023 (Fax)
HOME PAGE: http://www.personal.mbs.ac.uk/mmarchica/index.htm
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