Strategic Ownership Structure and the Cost of Debt

Review of Financial Studies, Vol. 25, No. 7

71 Pages Posted: 28 Apr 2012 Last revised: 13 Aug 2015

See all articles by Hadiye Aslan

Hadiye Aslan

Georgia State University - Department of Finance

Praveen Kumar

University of Houston - Department of Finance

Date Written: February 2012

Abstract

We theoretically and empirically address the endogeneity of corporate ownership structure and the cost of debt, with a novel emphasis on the role of control concentration in post-default firm restructuring. Control concentration raises agency costs of debt, and dominant shareholders trade off private benefits of control against higher borrowing costs in choosing their ownership stakes. Based on our theoretical predictions, and using an international sample of syndicated loans and unique dynamic ownership structure data, we present new evidence on the firm- and macro-level determinants of corporate control concentration and the cost of debt.

Keywords: Ownership structure, Cost of debt, Tunneling, Debt renegotiation, Corporate governance, Investor rights

JEL Classification: G21, G32

Suggested Citation

Aslan, Hadiye and Kumar, Praveen, Strategic Ownership Structure and the Cost of Debt (February 2012). Review of Financial Studies, Vol. 25, No. 7, Available at SSRN: https://ssrn.com/abstract=2047033

Hadiye Aslan

Georgia State University - Department of Finance ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Praveen Kumar (Contact Author)

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4770 (Phone)
713-743-4789 (Fax)

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