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Corporate boards and the leverage and debt maturity choices

Author

Listed:
  • Jarrad Harford
  • Kai Li
  • Xinlei Zhao

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.

Suggested Citation

  • Jarrad Harford & Kai Li & Xinlei Zhao, 2008. "Corporate boards and the leverage and debt maturity choices," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 1(1), pages 3-27.
    • Handle: RePEc:ids:ijcgov:v:1:y:2008:i:1:p:3-27
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