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Does firm culture influence corporate financing decisions? Evidence from debt maturity choice

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  • Datta, Sudip
  • Doan, Trang
  • Toscano, Francesca

Abstract

This study establishes a relation between corporate culture and debt maturity choice. Specifically, superior corporate culture is associated with the choice of shorter-term debt, supporting the notion that superior culture reduces managerial agency problems resulting in managers being more receptive to external monitoring through the choice of shorter-term debt. The culture subcomponents of integrity, teamwork, and innovation are found to have a meaningful influence on the debt maturity structure choice. The relation between culture and debt maturity is more pronounced in firms with higher managerial stock ownership and those that are financially constrained, but is weakened in firms with a greater CEO sensitivity to stock prices. Additionally, firms with superior culture are shown to have higher long-term credit ratings. These findings contribute at the confluence of corporate culture and debt financing literatures. A battery of robustness tests, including addressing endogeneity concerns, validate the findings.

Suggested Citation

  • Datta, Sudip & Doan, Trang & Toscano, Francesca, 2024. "Does firm culture influence corporate financing decisions? Evidence from debt maturity choice," Journal of Banking & Finance, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:jbfina:v:169:y:2024:i:c:s0378426624002243
    DOI: 10.1016/j.jbankfin.2024.107310
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    More about this item

    Keywords

    Corporate culture; Debt maturity choice; Managerial agency problems;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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