Debt Maturity Structure, Shareholder Rights, and Corporate Governance
39 Pages Posted: 10 Jul 2007
Date Written: July 7, 2007
This study investigates how debt maturity structure is influenced by the strength of shareholder rights. The empirical evidence reveals an inverse relation between the strength of shareholder rights and debt maturity. We contend that managers of firms with weak shareholder rights eschew choosing short-term debt to minimize frequent external monitoring. There is also evidence that regulation is a substitute for debt maturity in controlling agency costs. The effect of managerial entrenchment through classified boards is examined on debt maturity structure but is found to be insignificant. Finally, we demonstrate that weak shareholder rights likely bring about, and do not merely reflect, the use of longer-maturity debt.
Keywords: debt maturity, capital structure, shareholder rights, corporate governance
JEL Classification: G30, G32, G34, G38
Suggested Citation: Suggested Citation