Is Bank-debt Maturity Contingent on the Financial System?

Abstract

See summary in English

Purpose The purpose of this paper is to determine whether bank debt-maturity decisions are conditioned by growth opportunities, the firms ownership structure, or the institutional environment. Design/methodology/approach The empirical analysis is undertaken using an unbalanced panel data of Chilean and Spanish firms. Findings The results indicate that when banks are not allowed to become stockholders, managers use bank debt-maturity as a corporate governance mechanism. When banks can participate in the ownership of the firms that they finance, short-term bank debt can serve as a substitute for a governance mechanism. Originality/value The main contribution of this paper is the analysis of how differences in financial development among countries modify financial decisions by firms. Keywords Ownership structure, Panel data, Banking regulation, Growth opportunities, Agency problems, Bank debt-maturity Paper type Research paper