Premium
The Role of Multiple Large Shareholders in the Choice of Debt Source
Author(s) -
Boubaker Sabri,
Rouatbi Wael,
Saffar Walid
Publication year - 2016
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12148
Subject(s) - endogeneity , shareholder , debt , incentive , monetary economics , voting , sample (material) , economics , business , econometrics , finance , microeconomics , corporate governance , chemistry , chromatography , politics , political science , law
This paper examines the effect of multiple large shareholders (MLS) on debt choice. Using a sample of 654 French‐listed firms over the period 1998‐2013, we find that reliance on bank debt increases with the presence and voting power of MLS. This result is robust to endogeneity concerns and to several sensitivity tests. Moreover, we find that the effect of MLS on debt choice is more pronounced when agency problems between controlling and minority shareholders are more severe. Taken together, our results suggest that MLS reduce the controlling owner's incentive to avoid bank monitoring, leading to greater reliance on bank debt.