Corporate Governance and Loan Syndicate Structure
56 Pages Posted: 27 Dec 2010 Last revised: 15 May 2018
Date Written: May 10, 2018
Firms with greater shareholder rights have higher risk-shifting incentives. Such firms should have more concentrated loan syndicates to ensure more intensive monitoring. In the United States, the second generation antitakeover laws reduced the shareholder rights significantly. We find that loan syndicates became significantly less concentrated after the passage of these laws. Our results are robust to legal, institutional and political economy considerations that affect these tests. Additional tests support the risk-shifting channel. Our results have important implications for understanding how corporate governance causally affects financial contracting and creditor control in firms.
Keywords: Financial Contracting, Corporate Governance, Creditor Rights, Shareholder Rights, Syndicated Loans, Natural Experiment
JEL Classification: G21, G34
Suggested Citation: Suggested Citation