Short-term debt can reduce potential agency conflicts between managers and shareholders by exposing managers to more frequent monitoring by the credit market. Using an international dataset, we examine whether internal monitoring can substitute for external monitoring through the use of short-term debt. We find that the relationship between debt maturity and governance depends on the institutional environment in a given country. In common-law countries and in countries with stronger investor protection rights, governance and short-term debt act as substitutes. The extent of creditor rights, state-level governance quality, cultural characteristics, and economic development levels of countries also play a role in explaining the relationship between governance and debt maturity.

短期债务可以使经理人更频繁地受到信贷市场的监督，从而减少经理人和股东之间潜在的代理冲突。使用国际数据集，我们检查内部监控是否可以通过使用短期债务来替代外部监控。我们发现，债务期限与治理之间的关系取决于特定国家的制度环境。在普通法国家和投资者保护权更强的国家，治理和短期债务起到了替代作用。债权的范围、国家层面的治理质量、文化特征和国家的经济发展水平也对治理与债务期限之间的关系起到了解释作用。