Abstract

http://ssrn.com/abstract=2021522
 
 

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Creditor Control Rights and Board Independence


Daniel Ferreira


London School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Miguel A. Ferreira


Nova School of Business and Economics; European Corporate Governance Institute (ECGI)

Beatriz Mariano


London School of Economics & Political Science (LSE)

November 6, 2015

European Corporate Governance Institute (ECGI) - Finance Working Paper No. 443/2014

Abstract:     
We find that the number of independent directors on corporate boards increases by about 24% following violations of financial covenants in bank loans. This change in board composition appears to be a response to a shift of control rights in favor of creditors following covenant violations. By contrast, financial distress and poor financial performance at the time of covenant violations do not appear to explain the results. We conclude that board composition endogenously responds to changes in the allocation of control rights.

Number of Pages in PDF File: 57

Keywords: Corporate boards, Corporate governance, Covenant violations, Creditor intervention

JEL Classification: G21, G32, G33, G34


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Date posted: March 15, 2012 ; Last revised: November 13, 2015

Suggested Citation

Ferreira, Daniel and Ferreira, Miguel A. and Mariano, Beatriz, Creditor Control Rights and Board Independence (November 6, 2015). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 443/2014. Available at SSRN: http://ssrn.com/abstract=2021522 or http://dx.doi.org/10.2139/ssrn.2021522

Contact Information

Daniel Ferreira
London School of Economics - Department of Finance ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
(+44) 20 7955 7544 (Phone)
HOME PAGE: http://personal.lse.ac.uk/FERREIRD/
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Miguel Almeida Ferreira (Contact Author)
Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Beatriz Mariano
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
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