The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Creditor Control Rights and Board Independence
Published: 05/21/2018 | DOI: 10.1111/jofi.12692
DANIEL FERREIRA, MIGUEL A. FERREIRA, BEATRIZ MARIANO
We find that the number of independent directors on corporate boards increases by approximately 24% following financial covenant violations in credit agreements. Most of these new directors have links to creditors. Firms that appoint new directors after violations are more likely to issue new equity, and to decrease payout, operational risk, and CEO cash compensation, than firms without such appointments. We conclude that a firm's board composition, governance, and policies are shaped by current and past credit agreements.