Creditor Governance

42 Pages Posted: 27 Jul 2018 Last revised: 25 Oct 2018

See all articles by Tomas Jandik

Tomas Jandik

University of Arkansas - Sam M. Walton College of Business

William R. McCumber

College of Business, Louisiana Tech University

Date Written: October 2018


We provide evidence that large creditors exert a governing influence over corporate borrowers outside of covenant (technical) violation and payment default states. We show that, subsequent to syndicated loan origination, borrowers decrease capital inefficiencies, increase investments in productive assets, and improve operating performance relative to non-issuers. When firms are more opaque, syndicates are more concentrated in that lead arrangers hold a greater percentage of loan shares. We present evidence that creditor influence is increasing in the percentage of the deal retained by the lead arranger. Equity holders benefit from creditor influence subsequent to loan origination; cumulative abnormal stock returns around loan origination are positive and significant. These findings are robust to technical violations and shareholder governance. When creditor positions are more concentrated, creditor governance effects are of the same sign and magnitude as those provided by concentrated equity positions.

Keywords: syndicated loan, corporate governance, creditor governance, operating performance

JEL Classification: G21, G32, G33, G34

Suggested Citation

Jandik, Tomas and McCumber, William R., Creditor Governance (October 2018). Available at SSRN: or

Tomas Jandik

University of Arkansas - Sam M. Walton College of Business ( email )

WCOB 302
Fayetteville, AR 72701
United States
479-575-6147 (Phone)

William R. McCumber (Contact Author)

College of Business, Louisiana Tech University ( email )

COBB 209
P.O. Box 10318
Ruston, LA 71272
United States
318-257-2389 (Phone)
318-257-4253 (Fax)

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