The Role of Multiple Large Shareholders in the Choice of Debt Source

Financial Management, Forthcoming

46 Pages Posted: 20 Sep 2016

See all articles by Sabri Boubaker

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)

Walid Saffar

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: September 18, 2016

Abstract

This article examines the effect of multiple large shareholders (MLS) on debt choice. Using a sample of 654 French listed firms over the period 1998-2013, we find that reliance on bank debt increases with the presence and voting power of MLS. This result is robust to endogeneity concerns and to several sensitivity tests. Moreover, we find that the effect of MLS on debt choice is more pronounced when agency problems between controlling and minority shareholders are more severe. Taken together, our results suggest that MLS reduce the controlling owner’s incentive to avoid bank monitoring, leading to greater reliance on bank debt.

Keywords: Ownership structure; Corporate governance; Control contestability; Debt choice

JEL Classification: G30, G32, G34

Suggested Citation

Boubaker, Sabri and Rouatbi, Wael and Saffar, Walid, The Role of Multiple Large Shareholders in the Choice of Debt Source (September 18, 2016). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2840452

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

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

Walid Saffar (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Li Ka Shing Tower
Hong Hum
Kowloon
Hong Kong

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