Corporate Ownership Structure and the Choice Between Bank Debt and Public Debt
By Chen Lin, Yue Ma, Paul H. Malatesta, Yuhai Xuan. 2013
320 citations recorded by the source corpus.
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.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/4fb9e8a60d4c04df2b1419ccab469ff9adbd138f
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Citations in the corpus
- Ownership structure, control contestability, and corporate debt maturity (2015, methodology): “Following Claessens et al. (2000) and Faccio and Lang (2002), we compute the ultimate cash flow rights of the controlling owner as the sum of the products of ownership stakes along the different control chains.”
- Product market competition and debt choice (2018, methodology): “Relying on prior studies, we control for a wide range of firm characteristics that are deemed to affect firms’ choice between bank loans and publicly traded debt (e.g., Houston and James, 1996; Denis and Mihov, 2003; Lin et al., 2013).”