Distracted institutional shareholders and debt maturity

Adrian (Wai Kong) Cheung, Joye Khoo and Rui Wang

Journal of Financial Research, 2025, vol. 48, issue 2, 545-577

Abstract: We examine whether institutional shareholders’ distraction affects corporate debt maturity decisions. We find that firms with distracted shareholders are associated with lengthened debt maturity. The effect becomes stronger for firms with high information asymmetry or those with high levels of financial constraint. When distraction is high and debt maturity is low, firms hold more cash and use that cash in value‐destroying acquisitions. This supports the prevalence of agency problems when institutional shareholders are distracted. The impact of distraction is persistent and affects the debt maturity decision in the future. Our findings are robust to endogeneity and other concerns.

Date: 2025
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https://doi.org/10.1111/jfir.12419

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:48:y:2025:i:2:p:545-577

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