Creditor control rights and board independence

Daniel Ferreira, Miguel A. Ferreira and Beatriz Mariano

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We find that the number of independent directors on corporate boards increases by approximately 24% following financial covenant violations in credit agreements. Most of these new directors have links to creditors. Firms that appoint new directors after violations are more likely to issue new equity, and to decrease payout, operational risk and CEO cash compensation than firms without such appointments. We conclude that a firm’s board composition, governance, and policies are shaped by current and past credit agreements.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2018-10-01
New Economics Papers: this item is included in nep-bec and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published in Journal of Finance, 1, October, 2018, 73(5), pp. 2385 - 2423. ISSN: 0022-1082

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:84463

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