Creditor control rights and resource allocation within firms

• 成果类型: Article
• 署名作者: Ersahin, Nuri; Irani, Rustom M.; Le, Hanh
• 署名单位: Michigan State University; Michigan State University's Broad College of Business; University of Illinois System; University of Illinois Urbana-Champaign; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.07.006
• 发表日期: 2021
• 页码: 186-208
• 关键词: CONTROL RIGHTS; Restructuring; corporate governance; Creditors; Covenant violations

摘要

We examine the within-firm resource allocation and restructuring outcomes at firms violating debt covenants. Using establishment-level data from the US Census Bureau, we find that covenant violations are followed by reductions in employment, investment, and more frequent establishment closures among violating firms' noncore business lines and less productive establishments. These changes are concentrated among establishments at which manager-shareholder agency costs are pronounced and when key lenders have industry experience. Our findings suggest that enhanced creditor control reduces managerial agency costs and encourages a more efficient allocation of resources within the boundaries of firms in technical default. (C) 2020 Elsevier B.V. All rights reserved.