On the Relevance of Ownership Structure in Determining the Maturity of Debt
Social Science Research Network
Provided in Cooperation with: Manchester Business School, The University of Manchester Suggested Citation: Marchica, Maria (2008) : On the relevance of ownership structure in determining the maturity of debt, Manchester Business School Working Paper, No. 547, The University of Manchester, Manchester Business School, Manchester This Version is available at: http://hdl.handle.net/10419/50703 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und
... um Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers are produced by The University of Manchester -Manchester Business School and are to be circulated for discussion purposes only. Their contents should be considered to be preliminary. The papers are expected to be published in due course, in a revised form and should not be quoted without the authors' permission. Abstract I show that ownership by blockholding and board composition is an important determinant of corporate debt maturity structure. Using GMM methodology to control for the potential endogeneity of all regressors, I find a statistically and economically significant negative relation between shortterm debt and both blockholding and board structure, irrespective of the identity of shareholders. Robustness tests provide support for the hypothesis that less diversified shareholders tend to trade off underinvestment against the liquidity risk entailed in shorter maturities. Finally, I report strong evidence that the link with insider ownership is non-linear. ABSTRACT I investigate whether ownership by blockholders is an important determinant of corporate debt maturity. Using GMM methodology to control for the endogeneity of all regressors, I document an economically significant negative link between short term debt and ownership by blockholders. This suggests that, in trading off costs and benefits of short term debt, less diversified shareholders are more concerned about liquidity risk than underinvestment costs. Additionally, I report strong evidence that the link with insider ownership is non-linear. Finally, I find a negative relation between short term debt and board structure which indicates that these are alternative agency control mechanisms.