The Role of Multiple Large Shareholders in the Choice of Debt Source

Sabri Boubaker, Wael Rouatbi and Walid Saffar
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Wael Rouatbi: MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier
Walid Saffar: POLYU - The Hong Kong Polytechnic University [Hong Kong]

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Abstract: This paper examines the effect of multiple large shareholders (MLS) on debt choice. Using a sample of 654 French-listed firms over the period 1998-2013, we find that reliance on bank debt increases with the presence and voting power of MLS. This result is robust to endogeneity concerns and to several sensitivity tests. Moreover, we find that the effect of MLS on debt choice is more pronounced when agency problems between controlling and minority shareholders are more severe. Taken together, our results suggest that MLS reduce the controlling owner's incentive to avoid bank monitoring, leading to greater reliance on bank debt.

Date: 2017
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Citations: View citations in EconPapers (26)

Published in Financial Management, 2017, 46 (1), pp.241-274. ⟨10.1111/fima.12148⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02000696

DOI: 10.1111/fima.12148

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