Debt maturity structure, corporate governance, and hostile takeover threats: half a century of evidence

Exploiting a takeover-threat measure that is less directly subject to managerial choice than firm-chosen governance provisions and a large sample spanning more than half a century, this study examines the association between hostile takeover threats and corporate debt maturity structure. Drawing on the hostile takeover index that has been widely used in the literature and a sample covering the period from 1964 to 2020, we investigate whether variation in takeover threats is associated with differences in firms’ debt maturity choices. We find that firms facing greater hostile takeover threats tend to rely more heavily on short-maturity debt, a pattern consistent with, although not demonstrating, the view that takeover threats and short-term debt may serve as complementary governance mechanisms that enhance outside monitoring and constrain managerial discretion. These associations remain robust across firm fixed-effects regressions, propensity score matching, entropy balancing, and instrumental-variable specifications. We also find that the association between takeover threats and shorter debt maturity is stronger among highly levered firms but weaker among firms with greater profitability, larger cash reserves, and higher capital expenditures. Because our design mitigates but does not eliminate endogeneity and alternative explanations, we interpret the evidence as a robust conditional association between hostile takeover threats and firms’ debt maturity policies rather than as causal evidence.