Group affiliation and corporate debt maturity: Co-insurance or expropriation

Jagan Kumar Sur and Yogesh Chauhan

International Journal of Managerial Finance, 2020, vol. 17, issue 5, 687-707

Abstract: Purpose - We examine how business group affiliation affects corporate debt maturity. Design/methodology/approach - This study employs the financial data of all listed Indian companies obtained from the CMIE database for 2011–2018. The ordinary least square, firm-fixed effect and Fama–Macbeth regression methods are used for empirical analysis. We use propensity score matching and difference-in-difference method to address endogeneity issues. Further, two-stage least square (2SLS) regression is performed to mitigate the endogeneity that stems from simultaneity between debt maturity and leverage. Findings - Using Indian firms, we report that group affiliation is positively associated with corporate debt maturity; group firms use more long-term debt compared to similar standalone firms. We also observe that the positive effect of group affiliation on debt maturity is more pronounced in business group firms associated with a group having more resources and having unrelated diversification. However, information asymmetry and moral hazard problems weaken the impact of group affiliation on debt maturity structure of a firm. Overall, our results are consistent with co-insurance benefits that are an argument for the presence of business groups in emerging markets. Originality/value - This study contributes to the existing literature by testing the role of group affiliation on corporate debt maturity decisions in the Indian market context where market imperfections persuade firms to borrow from banks. This is also the first study on determinants of corporate debt maturity that distinguishes between public and private debt.

Keywords: Debt maturity; Business group; Emerging economy; Bank debt; Public debt; Unrelated diversification; India (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-04-2020-0197

DOI: 10.1108/IJMF-04-2020-0197

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().