CEO overconfidence and corporate debt maturity

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

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

73 Citations (Scopus)
53 Downloads (Pure)

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
DOIs
Publication statusPublished - 1 Feb 2016
Externally publishedYes

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