Internet Appendix to “Executive Compensation and the Maturity Structure of Corporate Debt”

Diamond (1991) also posits that firms with high leverage might prefer long-term debt to avoid suboptimal liquidation, thus predicting a positive relation between leverage (LEVERAGE) and debt maturity. Myers (1977) argues that agency costs between shareholders and bondholders can be reduced by matching the maturity of assets (ASSET_MAT) to the maturity of liabilities. All else equal, firms with high asset maturities are expected to have larger proportions of longterm debt in their capital structure. Datta et al. (2005) document a negative relation between managerial stock ownership (OWN) and debt maturity. This finding is consistent with the view that managers whose incentives are not aligned with those of shareholders (i.e., low managerial ownership) will not commit to the frequent monitoring imposed by short-term debt. Following previous studies (Barclay et al. (2003), Johnson (2003), Datta et al. (2005), and Billett et al. (2007)), we proxy for credit quality with firm value (SIZE). Regarding credit quality, we also control for the existence of debt ratings (RATE_DUM) and Altman’s (1977) Z-Score (ZSCORE_DUM). Firms with long-term debt ratings and higher Z-Scores are likely to have higher credit quality and can afford to borrow long-term debt.