External Governance and Debt Structure

• 成果类型: Article
• 署名作者: Bharath, Sreedhar T.; Hertzel, Michael
• 署名单位: Arizona State University; Arizona State University-Tempe
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy112
• 发表日期: 2019
• 页码: 3335
• 关键词: CORPORATE GOVERNANCE; capital structure; MANAGERIAL DISCRETION; private debt; public debt; STATE LAWS; bank loans; CHOICE; INFORMATION; COMPETITION

摘要

This paper examines how external governance pressure affects the type of debt that firms issue. Consistent with a governance mechanism substitution effect, we find that an exogenous increase (decrease) in governance pressure from the product (takeover) market has a significant negative (positive) impact on the use of bank (public debt) financing over public debt (bank loan) issuance. Tests using changes in the strictness of loan covenants provide corroborative evidence. These findings are consistent with the notion that firms endogenously substitute governance mechanisms and that demand for creditor governance depends on the relative strength of alternative external governance mechanisms.