CEO overconfidence and corporate debt maturity |
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| Institution: | 1. UQ Business School, The University of Queensland, Australia;2. University of Strathclyde, United Kingdom;1. Department of Commerce, Finance and Shipping, Cyprus University of Technology, Cyprus;2. Durham University Business School - Durham University, United Kingdom;3. Strome College of Business - Old Dominion University, United States;4. Cambridge Judge Business School, University of Cambridge, United Kingdom;1. Department of Economics and Finance, Southern Illinois University Edwardsville, Alumni Hall, Edwardsville, IL 62026, USA;2. John Cook School of Business, Department of Finance, Saint Louis University, 3674 Lindell Blvd., St. Louis, MO 63108, USA |
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| 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). |
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