Ownership Structure, Control Contestability, and Corporate Debt ‎Maturity

Abstract

During the past three decades, a significant amount of research on the structure of maturities (grace period) focused corporate debt. More recently, the role of corporate governance in determining the maturity of the debt has emerged as a central theme in the literature. The corporate governance literature has shown that self-interested controlling owners tend to divert corporate resources for private benefits at the expense of other shareholders. Such behavior leads the controlling owners to prefer long maturity debt to short maturity debt, to avoid frequent monitoring by lenders, which creates conflict between controlling and minority shareholders over the maturity structure of debt. In this paper, we examine whether the presence of multiple large shareholders (MLS), beyond the controlling owner, helps to mitigate this conflict. This result suggests that MLS curb the extraction of private benefits by the controlling owner and reduce her preference for less monitoring through the use of longer maturity debt. The findings are robust to a number of checks, including addressing endogeneity concerns and using alternative sample compositions and alternative regression frameworks. For estimating the model, STATA 15 software was used. Based on the results of major shareholders and there is a significant debt maturities. The distribution of voting power between large shareholders and debt maturity there is no correlation. There is significant relationship between the power of the ultimate owner and debt maturities. JEL classification: G30, G32, G34