CEO overconfidence and corporate debt maturity

Ronghong Huang, Kelvin Jui Keng Tan, Robert W. Faff

Research output: Contribution to journalArticle

38 Citations (Scopus)

Abstract

This paper extends our knowledge of corporate debt maturity structure by examining whether and to what extent overconfident CEOs affect maturity decisions. Consistent with a demand side story, we find that firms with overconfident CEOs tend to adopt a shorter debt maturity structure by using a higher proportion of short-term debt (due within 12. months). This behavior of overconfident CEOs is not deterred by the high liquidity risk associated with such a financing strategy. Our demand side explanation remains robust even after considering six possible alternative drivers including a competing supply side explanation (in which creditors are reluctant to extend long-term debt to overconfident CEOs).

Original languageEnglish
Pages (from-to)93-110
Number of pages18
JournalJournal of Corporate Finance
Volume36
Early online date6 Nov 2015
DOIs
Publication statusPublished - 1 Feb 2016

Keywords

  • cost of debt
  • debt maturity
  • liquidity risk
  • overconfidence

Fingerprint Dive into the research topics of 'CEO overconfidence and corporate debt maturity'. Together they form a unique fingerprint.

  • Cite this