CEO overconfidence and corporate debt maturity

This paper extends our knowledge of corporate debt maturity structure by examining whether and to what extent overconfident CEOs affect maturity decisions. Consistent with a demand side story, we find that firms with overconfident CEOs tend to adopt a shorter debt maturity structure by using a higher proportion of short-term debt (due within 12months). This behavior of overconfident CEOs is not deterred by the high liquidity risk associated with such a financing strategy. Our demand side explanation remains robust even after considering six possible alternative drivers including a competing supply side explanation (in which creditors are reluctant to extend long-term debt to overconfident CEOs). •We examine the relation between overconfident CEOs and corporate debt maturity.•Consistent with a demand side story, overconfident CEOs prefer shorter-term debt.•Overconfident CEOs use more short-term debt due within 12months.•We reject six possible alternative drivers including a supply side explanation.•The behavior of overconfident CEOs is not deterred by the liquidity risk that firms face.