Disproportional control rights and debt maturity

Ning Gao, Wei Jiang and Jiaxu Jin

International Review of Financial Analysis, 2023, vol. 85, issue C

Abstract: Using a hand-collected sample of U.S. dual-class firms, we find that corporate debt maturity increases in insiders' disproportional control rights, which is robust to several robustness tests. This relation is more pronounced among firms more vulnerable to control disruption. Besides, firms with greater disproportional control rights issue more long-term new debt. Further analysis of the stock market reaction to new debt issuance shows that controlling insiders' preference for long-term debt benefits outside shareholders. Overall, our findings suggest that the benefits of minimizing control disruption surpass the costs of long-term debt in insider-controlled firms.

Keywords: Dual-class shares; Disproportional control rights; Debt maturity structure; Controlling shareholders (search for similar items in EconPapers)
JEL-codes: G3 G32 G34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:85:y:2023:i:c:s1057521922003842

DOI: 10.1016/j.irfa.2022.102434

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