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Ownership and Control Structure as Determinants of Corporate Debt Maturity: a panel study of an emerging market

Authors

  • Özgür Arslan,

    Corresponding author
    1. Department of Business Administration, Faculty of Economics and Administrative Sciences, Hacettepe University, Ankara, Turkey
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  • Mehmet Baha Karan

    1. Department of Business Administration, Faculty of Economics and Administrative Sciences, Hacettepe University, Ankara, Turkey
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*Department of Business Administration, Faculty of Economics and Administrative Sciences, Hacettepe University, Beytepe 06800, Ankara, Turkey. E-mail: arslan@hacettepe.edu.tr

Abstract

This study highlights the corporate governance potential of debt maturity structure for Turkish firms through investigating its association with ownership and control structure. We model leverage and debt maturity as jointly endogenous under simultaneous equations framework. Firstly, we find that both concentrated ownership structure and presence of a large shareholder is directly but moderately related to corporate debt maturity. We also document that it is important for Turkish firms to match maturity of their assets with maturity of their liabilities. Our findings lend considerable support to the prediction that as firms get financially strong or have more growth opportunities they shorten their corporate debt maturity structure. Moreover, despite having a controlling large shareholder or a concentrated ownership structure, firms with growth opportunities still prefer shorter maturities in order to solve the underinvestment problems. Finally, firm size is positively associated with long-term debt and our empirical analysis provides no evidence that taxes affect debt maturity structure.

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