Affiliation:
1. Arizona State University
Abstract
Abstract
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.
Received May 18, 2016; editorial decision November 11, 2017 by Editor David Denis.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
Reference65 articles.
1. Financial ratios, discriminant analysis, and the prediction of corporate bankruptcy;Altman,;Journal of Finance,1968
2. Executive compensation, relative performance evaluation, and strategic competition: Theory and evidence;Aggarwal,;Journal of Finance,1999
3. An incomplete contracts approach to financial contracting;Aghion,;Review of Economic Studies,1992
4. The limitations of industry concentration measures constructed with Compustat data: Implications for finance research;Ali,;Review of Financial Studies,2008
Cited by
57 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献