Abstract

http://ssrn.com/abstract=2021522
 
 

References (18)



 
 

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Board Structure and Capital Structure


Daniel Ferreira


London School of Economics & Political Science (LSE) - 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


Universidad Carlos III de Madrid; London School of Economics & Political Science (LSE)

March 5, 2012


Abstract:     
Board structure has been linked to firm environment and characteristics, but the evidence is based on correlations rather than causal estimates. In particular, there is evidence of a positive correlation between board independence and financial leverage. Using a regression discontinuity design, we show that the number and fraction of independent directors increases following a debt covenant violation, as creditors can use the threat of accelerating loan payments to demand a more independent board of directors. The effect is economically important as a covenant violation implies up to one additional independent director in the board. Our findings establish a casual effect from firm characteristics – leverage – to board structure through a transfer of control from shareholders to creditors.

Number of Pages in PDF File: 37

Keywords: Corporate boards, Board independence, Capital structure, Covenant violations

JEL Classification: G32, G34

working papers series


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Date posted: March 15, 2012  

Suggested Citation

Ferreira, Daniel and Ferreira, Miguel A. and Mariano, Beatriz, Board Structure and Capital Structure (March 5, 2012). 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 & Political Science (LSE) - 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
Universidad Carlos III de Madrid ( email )
E-28903 Getafe (Madrid)
Spain
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
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References:  18
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