36 Pages Posted: 16 Mar 2006
Date Written: February 2007
Debt, and in particular, short-term debt have the potential to discipline managers. We examine the role of the board in making financing decisions that provide this discipline. Specifically, given a firm's characteristics, we predict that stronger boards will force the firm to hold more debt and more short-term debt. Employing a rich dataset of board characteristics and controlling for other aspects of a firm's corporate governance, we find support for these hypotheses. Our simple measure of director power is a robust and promising measure of internal governance.
Keywords: leverage, debt maturity, board effectiveness, incentive alignment, director power, governance
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
Harford, Jarrad and Li, Kai and Zhao, Xinlei Shelly, Corporate Boards and the Leverage and Debt Maturity Choices (February 2007). Available at SSRN: https://ssrn.com/abstract=891300 or http://dx.doi.org/10.2139/ssrn.891300