How does shareholder governance affect the cost of borrowing? Evidence from the passage of anti-takeover provisions

• 成果类型: Article
• 署名作者: Liu, Yukun; Wu, Xi
• 署名单位: University of Rochester; University of California System; University of California Berkeley
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101569
• 发表日期: 2023
• 关键词: COMMON RISK-FACTORS; corporate governance; cross-section; debt; management; Activism; equity; IMPACT; determinants; performance

摘要

This paper examines the effect of shareholder governance on firms' cost of borrowing using the voting outcomes of shareholder-sponsored anti-takeover governance proposals. Implementing a regression discontinuity design centered around the proposals' passing thresholds, we show that firms' public debt prices fall significantly upon the proposals' passage, and that banks demand higher interest rates and more general covenants on new loans issued to those firms. We find that these effects are more pronounced for riskier firms where shareholder-debtholder conflicts are more severe. Moreover, firms with passed shareholder-sponsored proposals become more volatile, reflecting an increase in their risk-shifting incentives. Collectively, our findings suggest that shareholder gover-nance exacerbates shareholder-debtholder conflicts and raises firms' cost of borrowing.(c) 2022 Elsevier B.V. All rights reserved.