The Mediating Effect of Financial Constraints on The Relationship Between Management Entrenchment and Debt Maturity with The Interactive Role of State-Affiliated Companies

Document Type : Research Paper

Authors

1 M.Sc. Department of Accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran.

2 Associate Professor, Department of Accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran

Abstract

ABSTRACT
The entrenchment of managers leads to an increase in power and the priority of maintaining their job status over the interests of shareholders. These conditions increase agency costs and shareholders' risk and decrease the company's value. Entrenched managers use debts with different maturities based on their goals. The presence of the government in the companies can affect the behavior of entrenched managers and adjust it. Based on this, this study aims to investigate the effect of management entrenchment on debt maturity, specifically focusing on the mediating role of financial constraints in government-affiliated companies compared to non-government-affiliated companies. Research method: To achieve the research goals, we studied the data from 129 companies over an 8-year period, from 2014 to 2021. We used a multiple linear regression model and a Sobel test to test the research hypotheses.The findings reveal that management entrenchment has a positive and significant impact on debt maturity. They also indicate that financial constraints partially mediate the relationship between management entrenchment and debt maturity. The research findings show that companies' dependence on the government weakens both the relationship between management entrenchment and financial limitation and the relationship between management entrenchment and debt maturity.This research brings a novel perspective to the field, shedding light on the impact of managerial entrenchment on debt maturity. The findings suggest that the current levels of managerial entrenchment in companies, particularly non-governmental companies, can lead to risky financing decisions and potentially increase managers' interests, thereby intensifying the conflict between owners and managers.

Keywords

Main Subjects

References

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  • Receive Date: 19 June 2024
  • Revise Date: 29 June 2024
  • Accept Date: 10 July 2024

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