Top management team stability and debt concentration

We empirically examine the effect of top management team (TMT) stability on corporate debt concentration. Using a sample of A-share listed companies in China from 2003 to 2020, we show that higher TMT stability is associated with less concentrated debt structures. We propose that a stable TMT can reduce the risk and cost of coordination failures with creditors, thereby decreasing the cost of diversifying debt structures. Thus, firms with higher TMT stability tend to choose a lower debt concentration. Further analysis suggests that this relationship is stronger in samples with higher default risk, lower liquidation values, and lower accounting quality. This study contributes to the literature on TMT stability and corporate debt concentration and has implications in terms of changes to a firm's TMT.