Corporate ownership structure and the choice between bank debt and public debt

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

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Author(s)

  • Chen Lin
  • Yue Ma
  • Paul Malatesta
  • Yuhai Xuan

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)517-534
Journal / PublicationJournal of Financial Economics
Volume109
Issue number2
Publication statusPublished - Aug 2013

Abstract

This article examines the relation between a borrowing firm's ownership structure and its choice of debt source using a novel data set on corporate ownership, control, and debt structures for 9,831 firms in 20 countries from 2001 to 2010. We find that the divergence between the control rights and cash-flow rights of a borrowing firm's largest ultimate owner has a significant negative impact on the firm's reliance on bank debt financing. In addition, we show that the control-ownership divergence affects other aspects of debt structure including debt maturity and security. Our results indicate that firms controlled by large shareholders with excess control rights may choose public debt financing over bank debt as a way of avoiding scrutiny and insulating themselves from bank monitoring. © 2013 Elsevier B.V.

Research Area(s)

  • Bank debt, Excess control rights, Ownership structure, Public debt

Citation Format(s)

Corporate ownership structure and the choice between bank debt and public debt. / Lin, Chen; Ma, Yue; Malatesta, Paul; Xuan, Yuhai.

In: Journal of Financial Economics, Vol. 109, No. 2, 08.2013, p. 517-534.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal