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https://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); Centre for Economic Policy Research (CEPR)

Beatriz Mariano


Cass Business School

October 24, 2016

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 approximately 24% following financial covenant violations in credit agreements. Most of these new directors are linked to creditors. Firms with stronger lending relationships with their creditors appoint more new directors in response to covenant violations than firms without such relationships. Moreover, firms that appoint new directors after violations are more likely to issue new equity and decrease CEO cash compensation than firms without such appointments. We conclude that a firm's board composition, governance, and policies are shaped by current and past credit agreements.

Number of Pages in PDF File: 81

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: October 26, 2016

Suggested Citation

Ferreira, Daniel and Ferreira, Miguel A. and Mariano, Beatriz, Creditor Control Rights and Board Independence (October 24, 2016). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 443/2014. Available at SSRN: https://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
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Beatriz Mariano
Cass Business School ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
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