Busy board and corporate debt maturity structure*

Prior literature has examined the effectiveness of the busy board by evaluating two competing hypotheses: quality point of view and busyness point of view. In response to these views, we argue and validate social identity theory, in the sense that, to maintain their entrenchment, managers of firms with busy boards tend to avoid monitoring from short-term debtholders by reducing shortterm debt financing. The magnitude of the negative effects increases when busy board members are independent directors compared to non-independent directors. The negative effect of a busy board is more pronounced in firms with lower CEOs' firm-related wealth, less experienced directors, and more foreign directors on the board. Further analysis shows that managers of firms with busy boards also increase cash holdings, decrease capital investment, and increase their entrenchment. Results are robust to alternative (information asymmetry) hypotheses, propensity score matching, entropy-balanced approach, and instrumental variable approach. We interpret our results as managers' ex-ante preclusion of external monitoring from short-term debtholders.