Abstract
I provide novel evidence that institutional investors, by influencing the maturity structure of corporate debt, play an active monitoring role. First, I find that institutional ownership is positively related to short-term debt and this relationship is not only statistically significant, but also economically sizeable. Second, I show that longer investment horizons and absence of potential business relations with the firm provide investors with stronger incentives to monitor managers by increasing the proportion of short-term debt in the company. This monitoring role is corroborated by robustness tests which reveal an increased probability of issuing short-term debt following a change in investor characteristics.
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