Debt Dynamic, Debt Dispersion and Corporate Governance

Tut, Daniel

Debt Dynamic, Debt Dispersion and Corporate Governance

MPRA Paper from University Library of Munich, Germany

Abstract: Why do some firms borrow from multiple creditors and employ multiple debt types? This paper shows that entrenched managers exploit coordination failure and free-riding problem amongst multiple creditors. [1] We find that managerial entrenchment is inversely related to debt specialization and creditors concentration. [2] We find that firms under entrenched management have a higher proclivity to employ multiple debt types and have a dispersed debt structure. Firms that are well-managed have a tendency to concentrate debt and borrow predominantly from a few creditors. [3] We also show that while bank debt is negatively related to debt specialization, market debt is positively related to debt specialization. Overall, our findings suggest that creditors can discipline managers through debt specialization.

Keywords: Ownership structure; corporate governance; debt specialization; banks; debt structure; debt types (search for similar items in EconPapers)
JEL-codes: G00 G2 G31 G32 G33 G34 G35 (search for similar items in EconPapers)
Date: 2022-06-18
New Economics Papers: this item is included in nep-ban and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Debt dynamic, debt dispersion and corporate governance (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113673

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