Control Rights and Capital Structure: An Empirical Investigation
We show that incentive conflicts between firms and their creditors have a large impact on corporate debt policy. Net debt issuing activity experiences a sharp and persistent decline following debt covenant violations, when creditors use their acceleration and termination rights to increase interest rates and reduce the availability of credit. The effect of creditor actions on debt policy is strongest when the borrower's alternative sources of finance are costly. In addition, despite the less favorable terms offered by existing creditors, borrowers rarely switch lenders following a violation. Copyright (c) 2009 the American Finance Association.
Year of publication: |
2009
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Authors: | ROBERTS, MICHAEL R. ; SUFI, AMIR |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 64.2009, 4, p. 1657-1695
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Publisher: |
American Finance Association - AFA |
Saved in:
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