The Impact of Corporate Governance on Public Debt Financing

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This research explores the impact of corporate governance on public debt financing by focusing on both the cost and the maturity structure of corporate bonds. First, we examine the relation between corporate governance and yield spreads of new bonds. Firms with higher CEO ownership level and family firms face higher yield spreads. By contrast, firms affiliated with parent firms as large shareholders enjoy lower yield spreads. These results show that yield spreads vary with the type of corporate governance.Next, we investigate the relation between corporate governance and maturity structure of new bonds. Firms with higher foreign ownership could issue new bonds with longer maturity. The result indicates that foreign investors inhibit managerial discretion, thereby leading to lengthen the maturity of public debt.