Corporate boards and the leverage and debt maturity choices

Jarrad Harford (), Kai Li () and Xinlei Zhao

International Journal of Corporate Governance, 2008, vol. 1, issue 1, 3-27

Abstract: Debt, and in particular, short-term debt have the potential to discipline managers. We examine the role of the board in making financing decisions that provide this discipline. Specifically, given a firm's characteristics, we predict that stronger boards will force the firm to hold more debt and more short-term debt. Employing a rich dataset of board characteristics and controlling for other aspects of a firm's corporate governance, we find support for these hypotheses. Our simple measure of director power is a robust and promising measure of internal governance.

Keywords: leverage; debt maturity; board effectiveness; incentive alignment; director power; corporate governance; financing decisions; internal governance. (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (47)

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