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Monitoring by Affiliated Bankers on Board of Directors: Evidence from Corporate Financing Outcomes
Author(s) -
SisliCiamarra Elif
Publication year - 2012
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2012.01191.x
Subject(s) - pledge , creditor , business , debt , finance , collateral , capital structure , debt ratio , senior debt , debt financing , covenant , financial system , accounting , internal debt , debt levels and flows , political science , law , philosophy , theology
Using a hand‐collected data set on boards of directors of large US nonfinancial companies, this paper investigates the effects of the presence of a creditor on a company's board. The results suggest that the presence of a creditor: 1) increases the amount of debt in a company's capital structure via an increase in private debt, 2) decreases the sensitivity of debt financing to the amount of tangible assets that a company holds, 3) decreases the cost of borrowing, and 4) reduces the pledge of collateral and financial covenants in debt contracts.