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

Chen Lin; Yue Ma; Paul Malatesta; Yuhai Xuan

doi:10.1016/j.jfineco.2013.03.006

Author(s)

Chen Lin
Yue Ma
Paul Malatesta
Yuhai Xuan

Related Research Unit(s)

City University of Hong Kong

Detail(s)

Original language	English
Pages (from-to)	517-534
Journal / Publication	Journal of Financial Economics
Volume	109
Issue number	2
Publication status	Published - Aug 2013

Link(s)

DOI	DOI https://doi.org/10.1016/j.jfineco.2013.03.006 Final Published version
	Check@CityULib
Link to Scopus	https://www.scopus.com/record/display.uri?eid=2-s2.0-84878979206&origin=recordpage
Permanent Link	https://scholars.cityu.edu.hk/en/publications/publication(bd408698-8c47-4a39-aa69-ad5321fc35f4).html

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)

[ RIS ] [ BibTeX ]

Corporate ownership structure and the choice between bank debt and public debt. / Lin, Chen; Ma, Yue; Malatesta, Paul et al.
In: Journal of Financial Economics, Vol. 109, No. 2, 08.2013, p. 517-534.

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

Lin, C, Ma, Y, Malatesta, P & Xuan, Y 2013, 'Corporate ownership structure and the choice between bank debt and public debt', Journal of Financial Economics, vol. 109, no. 2, pp. 517-534. https://doi.org/10.1016/j.jfineco.2013.03.006

Lin, C., Ma, Y., Malatesta, P., & Xuan, Y. (2013). Corporate ownership structure and the choice between bank debt and public debt. Journal of Financial Economics, 109(2), 517-534. https://doi.org/10.1016/j.jfineco.2013.03.006

Lin C, Ma Y, Malatesta P, Xuan Y. Corporate ownership structure and the choice between bank debt and public debt. Journal of Financial Economics. 2013 Aug;109(2):517-534. doi: 10.1016/j.jfineco.2013.03.006

Lin, Chen ; Ma, Yue ; Malatesta, Paul et al. / Corporate ownership structure and the choice between bank debt and public debt. In: Journal of Financial Economics. 2013 ; Vol. 109, No. 2. pp. 517-534.