Does Managerial Ability affect Debt Maturity?

Abstract

The maturity structure of debt is an essential feature of debt structure that has attracted considerable attention. Due to lower transaction costs and lower liquidity risk, firms use short-term debt. Therefore, the purpose of this study is to examine the relationship between managerial ability and debt maturity. Multivariate linear regression was used to test the research hypothesis. The statistical population consisted of 115 companies listed on the Tehran Stock Exchange during 2012-2021 (1150 firms- year observations). The model of Demerjian et al. [1] was used to measure managerial ability. The results of the research showed that there is a positive and significant relationship between managers' ability and debt maturity (short-term). In other words, the higher the managerial ability, the more short-term debt is used. This is because the cost of using this type of debt is lower.