Board monitoring, director connections, and credit quality☆

Jason Sandvik

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: Firms with poor board monitoring effectiveness receive lower credit ratings and larger credit spreads. I identify these effects by using director deaths as exogenous shocks to monitoring effectiveness. These effects are especially pronounced when firms are highly levered. Incremental decreases in monitoring effectiveness impact credit quality the most when a majority of the board members become co-opted by management and when firms are more likely to increase corporate risk.

Keywords: Board monitoring; Corporate governance; Cost of debt; Rating agency; Corporate default (search for similar items in EconPapers)
JEL-codes: G24 G33 G34 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s092911992030170x

DOI: 10.1016/j.jcorpfin.2020.101726

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