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How debt maturity reacts to the interactions of internal corporate governance mechanisms

Author

Listed:
  • Hanan Alhussayen
  • Ridha Shabou
  • Imed Medhioub

Abstract

As the two primary internal corporate governance mechanisms, boards of directors and ownership structures are important for disciplining managers through short-term and long-term debt and, thus, debt maturity. The interactions between these mechanisms tend to define which type of debt is the more effective discipline mechanism. Thus, this study aims to define the impacts of interactions between intensive board monitoring and ownership structures on debt maturity for all non-financial firms listed on the Saudi market from 2008 to 2013. The results reveal that board monitoring intensity encourages Saudi listed firms to apply more long-term debt. Both direct ownership by large shareholders and family-held firms as controlling shareholders strengthen the monitoring functions of the board and encourage Saudi listed firms to apply more long-term debt. In contrast, ultimate owners, who hold indirect ownership of firms, tend to distract the board from applying its monitoring functions effectively.

Suggested Citation

  • Hanan Alhussayen & Ridha Shabou & Imed Medhioub, 2021. "How debt maturity reacts to the interactions of internal corporate governance mechanisms," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 11(5), pages 691-717.
    • Handle: RePEc:ids:afasfa:v:11:y:2021:i:5:p:691-717
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