Ownership Structure, Control Contestability, and Corporate Debt Maturity

47 Pages Posted: 4 Oct 2015

See all articles by Hamdi Ben‐Nasr

Hamdi Ben‐Nasr

King Saud University - College of Business Administration

Sabri Boubaker

University Paris-Est Créteil (UPEC) - Institut de Recherche en Gestion

Wael Rouatbi

Montpellier Business School; Institut de Recherche en Gestion (Université Paris Est Créteil)

Date Written: October 2, 2015

Abstract

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.

Keywords: Ownership structure, Multiple large shareholders, Contestability, Debt maturity

JEL Classification: G20, G30, G32, G39, G34, M41

Suggested Citation

Ben-Nasr, Hamdi and Boubaker, Sabri and Rouatbi, Wael, Ownership Structure, Control Contestability, and Corporate Debt Maturity (October 2, 2015). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2668767

Hamdi Ben-Nasr

King Saud University - College of Business Administration ( email )

B.P. 2459
Riyad, 11451
Saudi Arabia

Sabri Boubaker

University Paris-Est Créteil (UPEC) - Institut de Recherche en Gestion ( email )

61 Avenue du General de Gaulle
94010 Creteil
France

HOME PAGE: http://www.irg.u-pec.fr/enseignant.php?num=58

Wael Rouatbi (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Institut de Recherche en Gestion (Université Paris Est Créteil) ( email )

80 Avenue du General de Gaulle
Creteil, 94000
France

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