Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

Does internal board monitoring affect debt maturity?

Tosun, Onur Kemal ORCID: and Senbet, Lemma W. 2020. Does internal board monitoring affect debt maturity? Review of Quantitative Finance and Accounting 54 (1) , pp. 205-245. 10.1007/s11156-018-00787-z

[thumbnail of Tosun-Senbet2019_Article_DoesInternalBoardMonitoringAff.pdf] PDF - Published Version
Available under License Creative Commons Attribution.

Download (1MB)


Using the Sarbanes–Oxley Act (SOX) as an exogenous shock to board structure, we identify internal monitoring via board independence and estimate its impact on corporate debt maturity. We introduce a triple difference-in-difference approach. Additionally, we use a simultaneous equations model and address that decisions about leverage and debt maturity are simultaneous. We also incorporate new debt issuance in the model to ensure the causality in the relation is from internal monitoring towards the maturity of new debt. The findings provide support for agency theory. As board independence increases, internal monitoring becomes stronger, and good governance substitutes for external control over managers through short-term debt. Subsequently, firms have more long-maturity debt. The results are robust to controlling for other internal monitoring mechanisms, CEO characteristics, financial constraints, cash, bond ratings, yield, and debt seniority. The impact of increased board independence on debt maturity is more significant for conglomerates and cases where there is a greater need for internal control over managers, such as CEO duality, high GIM index, straight debt, less strict covenants, high intangibility, high free cash flow, no majority blockholders, high discretionary accruals, or high real earnings management. In further analyses, we rule out the concern that our results are due to better reporting of internal controls through SOX Section 404 or an increase in auditors’ liability after SOX, rather than increased board independence.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Additional Information: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (, which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Publisher: Springer Verlag
ISSN: 0924-865X
Date of First Compliant Deposit: 2 May 2019
Date of Acceptance: 20 December 2018
Last Modified: 03 May 2023 22:47

Actions (repository staff only)

Edit Item Edit Item


Downloads per month over past year

View more statistics