Corporate boards and the leverage and debt maturity choices
by Jarrad Harford, Kai Li, Xinlei Zhao
International Journal of Corporate Governance (IJCG), Vol. 1, No. 1, 2008

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.

Online publication date: Tue, 25-Mar-2008

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