The Role of Multiple Large Shareholders in the Choice of Debt Source

This paper examines the effect of multiple large shareholders (MLS) on debt choice. Using a sample of 654 French-listed firms over the period 1998-2013, we find that reliance on bank debt increases with the presence and voting power of MLS. This result is robust to endogeneity concerns and to several sensitivity tests. Moreover, we find that the effect of MLS on debt choice is more pronounced when agency problems between controlling and minority shareholders are more severe. Taken together, our results suggest that MLS reduce the controlling owner's incentive to avoid bank monitoring, leading to greater reliance on bank debt.