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- Title
Corporate Governance and Loan-Syndicate Structure.
- Authors
Bharath, Sreedhar T.; Dahiya, Sandeep; Hallak, Issam
- Abstract
Firms with greater shareholder rights have a greater risk-shifting incentive, requiring more lender monitoring. Thus, a reduction in shareholder rights implies more diffused (less monitoring-intensive) loan syndicates. Using the passage of U.S. second-generation antitakeover laws as an exogenous shock that reduces shareholder rights as a natural experiment, we find that loan syndicates become significantly more diffuse after the passage of these laws. These results are confirmed in a large sample of bank loans made during the 1990–2007 period when the loan syndicate market matured. Our results show how corporate governance causally affects financial contracting and creditor control in firms.
- Subjects
CORPORATE governance; LEGAL status of stockholders; SYNDICATED loans; MONITORING of directors of corporations; ANTITAKEOVER strategies; BANK loans
- Publication
Journal of Financial & Quantitative Analysis, 2021, Vol 56, Issue 8, p2720
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S0022109020000745