Firm Age, Corporate Governance, and Capital Structure Choices

43 Pages Posted: 14 Nov 2017

See all articles by Robert L. Kieschnick

Robert L. Kieschnick

University of Texas at Dallas

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Date Written: November 11, 2017

Abstract

Do the effects of corporate governance on corporate capital structure choices change as a public firm ages? First, we address the direct effects of firm age and governance features on both its decisions to use debt and how much debt to employ. Our analysis reveals a number of novel results. While firm age is positively correlated with the use of debt, it is negatively correlated with how much debt a firm uses. We also find that the effects of firm age on how much debt a firm uses is primarily due to the interaction between firm age and its governance features. The more power that insiders possess, the less debt that the firm uses as it ages. We interpret our evidence as implying that over time, managers allow their risk preferences to dominate their firm capital structure decisions when they are protected from discipline.

Keywords: firm age, corporate governance, capital structure

JEL Classification: G32, G34

Suggested Citation

Kieschnick, Robert L. and Moussawi, Rabih, Firm Age, Corporate Governance, and Capital Structure Choices (November 11, 2017). Available at SSRN: https://ssrn.com/abstract=3069552 or http://dx.doi.org/10.2139/ssrn.3069552

Robert L. Kieschnick (Contact Author)

University of Texas at Dallas ( email )

800 W. Campbell Rd, SM31
Richardson, TX 75080
United States
972-883-6273 (Phone)

HOME PAGE: http://www.utdallas.edu/~rkiesch/

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

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