Does managerial Discretion affect Debt maturity in chilean firms? an agency cost anD asymmetric information approach

2.1 International evidence

Theoretical and empirical literature has extensively studied debt maturity determinants with a clear emphasis on developed markets. Among these factors is managerial discretion, whose effects on debt maturity have been analyzed by agency theories and information asymmetries.

The effect of managerial discretion on debt maturity is studied by the agency theory and typically focusing on the problem of overinvestment. Berle and Means (1932) and Jensen and Meckling (1976) showed that firms adjust their capital structures towards debt when faced with higher agency costs. This aspect has been corroborated by various empirical studies, such as those conducted by Kim and Sorensen (1986), Ang et al. (2000), Harvey et al. (2003), Fleming et al. (2005), Mohd et al. (2012), Kokoreva and Ulugova (2013), and Rakesh and Lakshmi (2013). The purpose of debt, as described by Jensen (1986), is to discipline managers and endogenously mitigate managerial discretion costs. This result has been confirmed mainly for larger, inefficient firms with low growth opportunities (Jensen, 1986; Stulz, 1990; Hart and Moore, 1995; Rajan and Winton, 1995; Stulz, 2000).

Capital structure adjustments towards debts are normally associated with a shortening of maturity. Leland (1998) developed a theoretical basis, indicating that companies shorten debt maturity in response to higher agency costs. Lasfer (1999) empirically argued that large companies, characterized by high agency costs, make use of short-term borrowing mechanisms to meet such costs.

Empirical studies, such as those by Ozkan (2000), Jiraporn and Tong (2008), and Alcock et al. (2011), confirmed previous results with the addition that ownership concentration also affects this relationship by acting inversely on debt maturity. This is due to the fact that short-term debts and concentration of ownership exercise a monitoring role for administrators. Datta et al. (2005), in an empirical study of 4,514 companies from the United States, concluded that ownership concentration and/or higher managerial shareholdings are inversely related to debt maturity. Alcock et al. (2011) provided further insight into the preliminary analysis, indicating that as owners and managers have increasingly aligned interests, the inverse effect of agency costs on debt maturity is reduced.

Other international studies have addressed the effects of managerial discretion on debt maturities from the perspective of ownership dilution. Berger et al. (1997) noted that debts increase when managers notice that their equity share in the company has decreased. This is explained by the role of managers in generating agency costs. Datta et al. (2005), Benmelech (2006), Harford et al. (2008), and Tanaka (2015) added that entrenched managers increase debt maturity, making more space for future discretionary behavior. Nevertheless, evidence has shown that managerial discretion is mitigated endogenously with the use of shorter-term debt (DeAngelo et al., 2002).

Companies with high agency costs also have other characteristics that, according to empirical evidence, determine debt maturity. Barclay and Smith (1995, 1996) and Cuñat (1999) noted that large or regulated companies with low growth opportunities are characterized by a higher proportion of long-term debt in their capital structure. Although international evidence has shown that large companies shorten debt terms to mitigate agency costs, the authors added that the incidence of size is explained in the sense that smaller companies rely more on bank credit. This aspect is corroborated by Johnson (1997).

The effect of managerial discretion on debt maturity is studied by the asymmetric information theory, typically focusing on the problem of underinvestment. Myers (1977) and Myers and Majluf (1984) argued that firms shorten debt maturity in response to underinvestment problems that are generated by managerial/owner discretion. Authors suggest that if companies have higher growth opportunities in their investment set, these companies should use short-term debts to eliminate the disincentive to invest. Billet et al. (2007), Jiraporn and Tong (2008), and Alcock et al. (2011) added that this measure reduces managerial discretion as the manager is exposed to external monitoring.

Information asymmetry can promote opportunistic behavior by managers. Such behavior is based on underinvestment, in order to increase their wealth at the expense of the firm's credit quality. (Leland and Pyle, 1977; Ross, 1977). Johnson (2003) noted that companies exchange the costs of underinvestment with liquidity risk costs when choosing debt maturities. This reflects the contradictory results found in empirical evidence. On one hand, Flannery (1986), Diamond (1991), Guedes and Olper (1996), and Berger et al. (2005) noted that lower risk firms prefer debts with shorter maturities. For these companies, the cost of underinvestment problems is more relevant than liquidity risks. On the other hand, Barclay and Smith (1995) and Stohs and Mauer (1996) indicated that low risk firms have longer debt maturities due to the greater importance of liquidity risk.

But Smith and Watts (1992), Collins et al. (1995) and Gaver and Gaver (1995) argue that managers associate the greatest growth opportunities with better economic compensation. These results could generate a reduction effect of managerial discretion greater than that obtained by the issuance of short-term debt (Myers, 1977; Myers and Majluf, 1984), allowing a greater proportion of long-term debt to mitigate the firm's insolvency risk

Asset composition also determines debt maturity. Stohs and Mauer (1996), Graham and Harvey (2001), Scherr and Hurlburt (2001), Ozkan (2000, 2002), and Heyman et al. (2008) added that firms attempt to match the maturity of their debts with their assets. Thus, as investments in assets are more tangible, firms will employ long-term debt in order to mitigate liquidity risk.

Studies addressing debt maturity determinants in emerging markets are limited, due to differences in the economic and institutional context. Joeveer (2013), analyzed companies from 9 emerging European countries and concluded that country characteristics have a greater impact on the level and term of small company debts, while firm characteristics have a greater influence on large companies. Similar results were found by Mokhova and Zinecker (2014).

In the Latin American market there is also relevant evidence about the factors that determine the debt maturity. Kirch and Soares (2012) point out that the financial development of Latin American markets does not affect corporate debt maturity. However, a higher quality institutional environment does affect debt maturity positively, favoring long term debt.

Mateus and Terra (2013) studied debt maturity for 986 Latin American firms and 686 Eastern European firms. Their results highlight the differences between these markets. In Latin America, debt and maturity are considered complementary policies, while they are considered substitutes in Eastern Europe. Soares (2009, 2011) supported these results for companies in Latin America.

2.2 Evidence in the Chilean market

There are few studies on debt maturity in Chile, and all of them are oriented toward companies listed on the stock market.

Azofra et al. (2004) developed an empirical analysis using incomplete panel data for 169 companies between 1990 and 2001. The authors noted that the high ownership concentration, along with the presence of growth opportunities in Chilean companies, favored debt as a financing source. Furthermore, when these companies require external funding, they decide to fund their growth opportunities through short-term debts. Another result from their research is that larger companies with a greater need for funds prefer more extensive debt maturities. Saona and Vallelado (2005) supported earlier findings, concluding that firms with high growth opportunities, concentrated ownership, and the need for external funding, issue short-term debts to finance their investments. This evidence supports the idea that short-term debt is an efficient funding mechanism that mitigates problems related to agency costs and information asymmetries.

More recently, Saona and Vallelado (2014), in a comparative study of Chilean and Spanish firms, maintained that firms confront a trade-off between debt maturity and bank share in the firm's ownership structure. In firms that allow banks to become stockholders, managers shorten maturity as an instrument of corporate governance. The authors further added that this decision depends on the firm's growth opportunities.

Castañeda and Contreras (2016) elaborated an empirical study based on 50 Chilean companies and concluded that debt maturity, mainly greater than a year, is concentrated mostly in large regulated companies with low growth opportunities. They add that information asymmetries tend to shorten Chilean company debt terms.

Our work extends literature on debt maturity for Chilean firms, but differs from previous studies for two reasons. First, our study measures the effect of managerial discretion on the debt maturity decision. Second, through medium-sized, small and micro-enterprise sampling, it was possible to analyze the debt maturity decision in a different context in terms of access to financing. Nearly two thirds of the samples were taken from small and micro firms, for which credit access and liquidity conditions could affect debt maturity, differing from firms listed on the stock exchange.

4.1 Data

Data used in this research was obtained from the Longitudinal Survey of Companies (ELE), prepared by Chile's Ministry of Economy, Development, and Tourism. Surveys were published in version 1 (ELE1), 2 (ELE2) and 3 (ELE3), containing qualitative and quantitative information on Chilean firms for the periods of 2007, 2009 and 2013, respectively. According to the ministry, the objective of this survey is to characterize the country's enterprises by size and economic activity, in order to identify business development determinants.

The main advantage provided by the ELE is the possibility of obtaining a representative sample in terms of size and organizational structures that have not been previously studied in Chile. According to Table 1, the total sample from all three versions of the ELE is distributed over 2697 large (18.32% of the sample), 2096 midsize (14.24%), 3881 small (26.37%), and 6045 micro (41.07%) enterprises. Large enterprises are mainly public companies (open and close equity) in which ownership and corporate control are separated, while micro and small enterprises are structured mainly as limited liability companies or one-person companies in which it is possible to observe total ownership concentration in the manager.

Utilizing information contained in the all versions of the ELE, a set of relevant information was developed mainly for accounting, financing, and administration. A pooled database was compiled from 14719 companies, distributed across 6647 (ELE1), 3882 (ELE2), and 4190 companies (ELE3). Firms with incomplete records and those in the financial intermediation sector were eliminated. Table 2 summarizes the categories of variables and their measurements.

The dependent variable of the study is the debt maturity and the variable for growth opportunities is the variable used to separate the sample into two subsamples; which are then defined.

Debt maturity. This is the dependent variable of the investigation. The debt maturity of the firm

(M) is measured by the long-term debt to total debt ratio. This form of measurement has been widely used in previous studies carried out both in Chile (Azofra et al., 2004, Saona and Vallelado, 2005) and in other countries (Lasfer 1999, Mateus and Terra, 2013). Measures ranked in years as elaborated by Barclay and Smith (1995) and Jiraporn and Tong (2008) are not possible to apply without an exact record of debt maturity from the companies within the sample.

Growth opportunities. We measure the firm's growth opportunities through Returns On Assets (ROA). Danbolt et al. (2011) note that accounting indicators of actual returns such as ROA or ROE are positively and significantly correlated with measures of future firm growth (market to book equity, price to earnings per share, or Tobin's Q). The ROA is used to separate samples between firms with high and low growth opportunities as well as to verify the conditional effect of other variables on debt maturity. We calculated ROA for each company to later determine this indicator's average in each economic sector and survey. Firms with high growth opportunities possess an above-average ROA, while firms with below-average ROAs were classified as having low growth opportunities.

Control variables correspond to managerial discretion, agency costs, capital structure, external monitoring, ownership structure, assets tangibility, belonging to business holdings and firm size. These variables are detailed below.

Managerial discretion. Managerial discretion (MD) is measured by the dummy variable previous dismissal (value 1 if the manager was dismissed from his/her previous management position and 0 otherwise) and by the number of previous businesses that ceased to operate under the management of the manager. Both measures have not been evaluated in the empirical literature. Hambrick and Abrahamson (1995) and Finkelstein and Boyd (1998) point out that the measurement of managerial discretion is a complex process. But the advantage of measuring these past discretionary behaviors is that they make it possible to determine if such behaviors are mitigated or prevailing in their current companies, which will depend on the effectiveness of the implicit monitoring mechanisms of these companies. If such mechanisms are effective, these opportunistic behaviors would be mitigated, which would reduce the liquidity risk of the current company through the choice of long-term debt. Otherwise, the discretionary behavior of the manager will increase liquidity risk by encouraging the issuance of short-term debt. Finally, the effect of managerial discretion on the debt maturity will depend on the trade-off between the effectiveness of the monitoring mechanisms implicit in growth opportunities and the past discretionary behavior of the manager.

Agencycosts. Agency costs (AC) are used to measure the effect of non-optimal investment policies (overinvestment/underinvestment) on debt maturity (Lasfer, 1999; Ozkan, 2000; Jiraporn and Tong, 2008; Alcock et al., 2011). This measure was proposed by Ang et al. (2000) and has been widely used in a variety of empirical studies.

Capital structure. Debt (LEV) is measured by the debt to equity ratio. As a maturity determinant, is included to quantify the preference for mitigating overinvestment/underinvestment (Flannery, 1986; Diamond, 1991; Guedes and Olper, 1996; Berger et al, 2005) or liquidity risk (Barclay and Smith 1995; Stohs and Mauer, 1996).

External monitoring. The monitoring of external financers (EM) is measured by the length of the business relationship between the company and its financiers (Ang et al., 2000; Fleming et al., 2005). The longer this term, the greater the monitoring done by external financiers. However, this variable implicitly quantifies the trust or distrust of the external financiers as to the term of payment of the funds that contribute to the financing of the company. A negative (positive) relationship between this variable and the debt maturity is indicative of commercial mistrust (trust), so that greater external monitoring will promote a reduction (extension) of such maturity.

Ownership structure Ownership structure (OS) ismeasured by three dummy variables associated with the role of the manager in the ownership structure (owner/manager, partner, and manager/outsider). These ownership structure variables are used to measure alignment effects (Ozkan, 2000; Jiraporn and Tong, 2008; Alcock et al, 2011) or managerial entrenchment (Datta et al, 2005; Benmelech., 2006; Harford et al, 2008; Tanaka, 2015) caused by concentration and dilution of ownership, respectively.

Assets tangibility. Tangible assets (TANG) is measured by long-term assets to the total assets ratio of the company. This measure of tangibility or maturity of the assets has been widely used by various international studies to verify if the term of the debts is matched with the maturity of the assets (Stohs and Mauer, 1996; Graham and Harvey, 2001; Scherr and Hurlburt, 2001; Ozkan, 2000, 2002; Heyman et al., 2008).

Other control variables are included such as size and whether the company belongs to a business holding, which are in line with other empirical studies.

4.2 Econometric method

To estimate the determinants of debt maturity for Chilean companies, a pooled Two-limit Tobit regression (2LTR) model was estimated. The use of the 2LTR model is justified because the debt maturity is a continuous variable censored between 0 and 1, for firms that have between 0% and 100% of long-term debt. This model is estimated by maximum likelihood (ML) and problems of efficiency associated with the estimation are corrected with the use of robust variances. The empirical model used is as follows:

Where M_it is the variable for debt maturity, which is censored in the [0,1] interval. The OS_it variable measures ownership structure, defined by three dichotomous variables described in table 2. The MD_it variable corresponds to managerial discretion, measured by the number of previous non-operating businesses and the dummy variable for previous dismissal. The AC_it variable represents agency costs, SIZE_it is the firm size measured by the natural logarithm of total assets, EM_it is the variable that measures monitoring of external funders, LEV_it is the debt to equity ratio, HD_it is a dummy variable assigned to a value of 1 if the company belongs to a business holding, and 0 otherwise, and TANG_it indicates asset tangibility.

The estimated model includes dummies in order to control differences by economic sector and by time-year.

5.1 Descriptive analysis

Table 3 shows the data descriptive statistics. It is important to note that the surveys are not strictly comparable due to differences in sample size and the fact that companies are not necessarily repeated from one sample to another.

Descriptive results show that agency costs, measured by the operating expenses to sales ratio, represent 11.38%, 24.50%, and 17.75% on average, respectively. Regarding ELE1, an incremental tendency of agency costs is shown towards other surveys.

From ELE1, we observe that the percentage of companies managed by their owners falls from 35.71% to 18.15%, while those with an outsider manager increases from 27.23% to 45.19%. This is due to the fact that in ELE1 sampling design, small and micro enterprises have greater participation, while large enterprises are most likely to participate in ELE3. Regarding 2007, the proportion of companies managed by an owner/manager fell to 14.07% in 2009 and 17.56% in 2013. Accordingly, we observed lower managerial ownership, with figures ranging from 52.57% equity in ELE1 to 35.45% in ELE3. This fact is related to the greater agency costs described previously.

Measures of managerial discretion for 2007 indicate that 5.86% of current company managers were dismissed from their previous managerial job and/or 1.33 companies stopped operating under their previous management. This first proportion dropped to 2.89% and 1.51% for 2009 and 2013, respectively, while the second figure fell from 0.39 to 0.25. This may be due to the increased participation of large enterprises in ELE3.

As the managers are contracted for current managerial jobs, the history of discretion behavior could be offset by restriction mechanisms imposed by the manager himself to improve his discretion, or by means of internal monitoring by owners. This variable captures two expected potential effects on debt maturity given past history. On one hand, a negative ex-ante effect will be defined, marked by the dominance of past managerial discretion on their current behavior. On the other hand, positive ex-post effects are defined and outlined by internal monitoring mechanisms, and restrictions are set by managers for their current performance. It was anticipated that the trade-off between both of these would define the final effect on debt maturity.

Regarding capital structure, it is observed in aggregate terms that Chilean companies mostly use debt as a financing source in relation to equity; this debt is mainly short-term. Firms maintain commercial relations with external funders who play a monitoring role for companies and their management. This relationship ranges between 12 and 16 years on average.

Results also show that most Chilean companies do not belong to business holdings and tend to adopt an important proportion of long-term assets (tangibility), although not primarily in their accounting structure.

5.2 Univariate analysis for growth opportunities

In this section, we will conduct non-parametric tests aimed at verifying the differences in company samples according to their growth opportunities.

Growth opportunities were measured using Return on Assets (ROA). Since the ELE only provides accounting data and not market data, this proxy may impose a limitation. However, Danbolt et al. (2011) note that accounting indicators of actual returns such as ROA or ROE are positively and significantly correlated with measures of future firm growth (market to book equity, price to earnings per share, or Tobin's Q). This justifies the use of this proxy.

For characterization of each company, based on said quality, we calculated ROA for each company to later determine this indicator's average in each economic sector and survey. Firms with high growth opportunities possess an above-average ROA, while firms with below-average ROAs were classified as having low growth opportunities. By this criterion, the original sample was divided into 6,917 companies with high growth opportunities (2,984 companies from ELE1, 1,817 from ELE2 and 2,116 from ELE3) and 7,802 with low growth opportunities (3,663 companies from ELE1, 2,065 from ELE2 and 2074 from ELE3).

Separating samples according to growth opportunities is based on the approaches of Jensen (1986) and Barclay and Smith (1995). Companies with high growth opportunities are characterized by a high ownership concentration. This aspect acts by monitoring managerial discretion, which may implicitly affect the debt maturity decision. Furthermore, Muñoz and Sepulveda (2016) corroborated this idea and added that for firms with low growth opportunities, internal monitoring is less effective on agency costs, leading greater company debt.

The results from Table 4 indicate differences between the groups of companies. Despite differences in company sizes, the Wilcoxon test results are cross-sectional with each of the ELE surveys.

It was noted that firms with high growth opportunities have lower agency costs with respect to companies with low growth opportunities. Differences between operating expenses to sales ratio are significant at 1%. These results are consistent with Jensen (1986) in the sense that firms with low growth opportunities have a greater incentive to incur agency costs associated with overinvestment.

Regarding ownership structure, we find that firms with high growth opportunities are managed to a greater extent by their owners. On the other hand, firms with low growth opportunities are managed by a manager with partial ownership (partner) or an outsider. Differences in management proportions and company control are significant at 1%. This supports Jensen (1986), Fleming et al. (2005), and Muñoz and Sepulveda (2016) in the sense that firms with low growth opportunities are more likely to incur high agency costs when a greater degree of separation exists between ownership and corporate control.

Statistically significant differences were also observed regarding debt. We note that firms with low growth opportunities have a higher level of leverage and a more extensive relationship with external funders with respect to firms with higher growth opportunities. Therefore, consistent with Jensen (1986), companies tend to be monitored by financial institutions and/or external creditors as their investment projects are limited. Furthermore, firms tend to be financed mostly through short-term debts, although firms with high growth opportunities have lower debt maturity.

Managerial discretion variables indicate that firms with high growth opportunities have higher proportions of managers who were dismissed from their previous managerial jobs. This result shows the possibility of such firms to hire these outsiders using a costly approach to monitor and control their discretionary behavior. Meanwhile, the variable representing the number of previous non-operative businesses does not differ significantly between firms with high or low growth opportunities.

Results for the tangibility variable reveal that, on average, there is a higher level of this kind of assets in firms with low growth opportunities.

For the other control variables, such as size (using total assets as a proxy, measured in millions of pesos), we observed that companies with low growth opportunities are usually larger companies. Additionally, we find that there are a higher proportion of companies with low growth opportunities that belong to holdings. This difference is significant at 1%.

5.3 Tobit regression analysis

It was concluded in the previous section that growth opportunities affect Chilean companies' financing policies. Companies with low growth opportunities are characterized by having diluted ownership structures, higher agency costs, and being larger companies. These factors induce higher leverage, thus weighing on the financial decision of debt terms.

Regression results from specification (1), specifically marginal effects, are presented in Tables 5 and 6 for companies with high and low growth opportunities, respectively. All model specifications control differences by economic sectors and time-year through dummy variables.

First, we analyzed firms with high growth opportunities, as described in Table 5. If agency costs increase by 1%, debt maturity (long-term debt) is reduced between 2.98% to 6.11% according to the model specifications. Firms with higher agency costs reduce debt maturities, a result that is consistent with previous research (Barclay and Smith, 1995; Barclay and Smith, 1996; Leland, 1998; Lasfer, 1999; Jiraporn and Tong, 2008; Alcock et al, 2011). In addition, larger companies lengthen debt maturities. When firm size increases by 1%, the long-term debt that quantifies the financing maturity increases between 1.39% and 1.79%.

A significant and positive relationship was found between debt maturity and debt level. When debt increases by $1 respect to equity, debt maturity (long-term debt) increases between 1.09% and 1.31%. This support hypothesis H1 and proves that firms prefer longer debt maturities. Johnson (2003) argues that by including debt as a determinant of maturity, positive relationships found are synonymous with firm preference to mitigate liquidity risk or increase firm's credit quality. This evidence is supported through the results obtained by Barclay and Smith (1995, 1996) and Stohs and Mauer (1996). Therefore, for Chilean companies with high growth opportunities, costs associated with liquidity risk are greater than those generated from underinvestment problems.

At a significance level of 1%, a direct relationship was found between debt maturity and asset tangibility. We note that if long-term assets increase by 1%, long-term debt increases between 6.20% and 7.16%. These results corroborate previous studies (Stohs and Mauer, 1996; Graham and Harvey, 2001; Scherr and Hulburt, 2001; Ozkan, 2000, 2002; Heyman et al, 2008). Chilean companies with high growth opportunities match the maturity for assets and debts to mitigate short-term insolvency risks associated with potential agency problems.

External monitoring is not a relevant variable for the debt term decision of companies with high growth opportunities.

An inverse and significant relationship is observed between debt maturity and firms belonging to business holdings. If the firm belongs to a business holding, debt maturity (long-term debt) is reduced between 1.37% and 2.38%. Chilean firms establish a financial hierarchy based on internal capital market to business holdings, with lower funding costs and less restrictive contracts when compared to foreign markets. Our results support findings by Azofra et al. (2004) and suggest that firm financial deficits are financed by internal loans to business holdings. If the firm needs additional resources, it will issue debt with lower financing costs and short-term maturities. This result implicitly mitigates the potential effect of underinvestment, suggesting compliance with the pecking order theory (Myers, 1977; Myers and Majluf, 1984).

It can be seen that firms with high growth opportunities, managed by their owners, have shorter debt maturities (debt maturity is reduced between 1.16% and 1.56% in this type of ownership structure) when compared to those managed by a partner, in which case the debt term increases significantly (between 1.11% and 1.77% in this type of ownership structure). This result contends that ownership concentration reduces debt maturity, confirming international results contributed by Ozkan (2000), Jiraporn and Tong (2008), Alcock et al. (2011), Azofra et al. (2004), and Saona and Vallelado (2005) for the Chilean market. Additionally, it also demonstrates the effects of managerial entrenchment on debt maturity (Datta et al., 2005; Benmelech, 2006, Harford et al., 2008; Tanaka, 2015).

The variable numbers of non-operating businesses and previous dismissal, measuring past managerial discretion, have positive and significant effects on debt maturity. The fact that the manager was dismissed from his previous managerial work increases the debt maturity (long-term debt) between 1.40% and 1.61%, while for each business that stopped operating because of his managerial management in other companies, debt maturity increases between 0.79% and 1.29% in its current company. This support hypothesis H2. These unprecedented results show that in firms with high growth opportunities, internal monitoring mechanisms, or self-imposed restrictions by administrators, dominate past managerial discretions, increasing debt terms. At the moment of current debt issue, this evidence supports the hypothesis that these managers prefer the liquidity of the firms.

We include the effect of agency costs in Test 1, which measures the null hypothesis H₀: β₂ + β₆ + β₃ > 0. This hypothesis compares the preference for liquidity in the debt decision and discretionary management in relation to effects of agency costs on debt maturity. As observed, this test is rejected at 1% for all specifications. Firms with high growth opportunities have a greater tendency to reduce debt maturity. Such actions constitute a greater preference for mitigating overinvestment problems in relation to liquidity risk. Thus, the hypothesis H3 cannot be sustained.

Secondly, we analyze Table 6, which provides results for companies with low growth opportunities.

Results show that debt, firm size, and asset tangibility positively and significantly affect debt maturity. However, the factors of agency costs and companies belonging to holdings significantly reduce debt terms. These results are similar to those shown for firms with high growth opportunities. Now, the positive effect of debt on debt maturity supports the hypothesis H1. Regardless of growth opportunities level, firms extend the debt-term as a way to mitigate liquidity risk.

Another similar and transverse result for growth opportunities is ownership structure. Ownership concentration significantly reduces debt terms, while dilution extends them. However, the manager being an outsider has no impact on debt maturity.

External monitoring has a negative and significant relationship with debt maturity. External funders who monitor companies with low growth opportunities tend to mitigate risk on debts issued by inducing shorter-term debts. Such an action corroborates approaches by Billett et al. (2007), Jiraporn and Tong (2008), and Alcock et al. (2011), as reducing debt maturity has a mitigating effect similar to the effect that restrictive debt contract covenants have on debt agency costs.

Managerial discretion variables, previous dismissal, and the number of non-operating businesses have no statistically significant effects on debt maturity. This result does not support hypothesis H2. Regarding this, at a significance level of 1%, Test 1 is rejected. This result, similar to what has been previously observed for firms with high growth opportunities, indicates that the net effect of the debt decision and agency costs promotes debt term reduction. This result does not support hypothesis H3.