Corporate Governance and Loan Syndicate Structure

Bharath, Sreedhar T.; Dahiya, Sandeep; Hallak, Issam

doi:10.2139/ssrn.1731374

Corporate Governance and Loan Syndicate Structure

56 Pages Posted: 27 Dec 2010 Last revised: 15 May 2018

See all articles by Sreedhar T. Bharath

Sreedhar T. Bharath

Arizona State University (ASU) - Finance Department

Sandeep Dahiya

Georgetown University - Department of Finance

Issam Hallak

Joint Research Center of the European Commission; KU Leuven - Faculty of Business and Economics (FEB)

There are 2 versions of this paper

Date Written: May 10, 2018

Abstract

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

Bharath, Sreedhar T. and Dahiya, Sandeep and Hallak, Issam, Corporate Governance and Loan Syndicate Structure (May 10, 2018). Available at SSRN: https://ssrn.com/abstract=1731374 or http://dx.doi.org/10.2139/ssrn.1731374