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Does Corporate Governance Matter to Bondholders?

Journal of financial and quantitative analysis, 2005-12, Vol.40 (4), p.693-719 [Peer Reviewed Journal]

Copyright © School of Business Administration, University of Washington 2005 ;Copyright 2005 School of Business Administration ;Copyright University of Washington, School of Business Administration Dec 2005 ;ISSN: 0022-1090 ;EISSN: 1756-6916 ;DOI: 10.1017/S0022109000001940 ;CODEN: JFQAAC

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Title:
Does Corporate Governance Matter to Bondholders?
Author: Klock, Mark S. ; Mansi, Sattar A. ; Maxwell, William F.
Subjects: Anti takeover strategy ; Bond market ; Bond markets ; Bonds ; Business structures ; Chief executive officers ; Convexity ; Corporate debt ; Corporate governance ; Correlation analysis ; Costs ; Credit ratings ; Debt ; Debt financing ; Empirical tests ; Financial economics ; Financial leverage ; Financing ; Shareholders ; Statistical analysis ; Stock exchange ; Stock prices ; Stock returns ; Stockholders ; Studies ; U.S.A ; Yield curves
Is Part Of: Journal of financial and quantitative analysis, 2005-12, Vol.40 (4), p.693-719
Description: We examine the relation between the cost of debt financing and a governance index that contains various antitakeover and shareholder protection provisions. Using firm-level data from the Investors Research Responsibility Center for the period 1990–2000, we find that antitakeover governance provisions lower the cost of debt financing. Segmenting the data into firms with the strongest management rights (strongest antitakeover provisions) and firms with the strongest shareholder rights (weakest antitakeover provisions), we find that strong antitakeover provisions are associated with a lower cost of debt financing while weak antitakeover provisions are associated with a higher cost of debt financing, with a difference of about 34 basis points between the two groups. Overall, the results suggest that antitakeover governance provisions, although not beneficial to stockholders, are viewed favorably in the bond market.
Publisher: New York, USA: Cambridge University Press
Language: English
Identifier: ISSN: 0022-1090
EISSN: 1756-6916
DOI: 10.1017/S0022109000001940
CODEN: JFQAAC
Source: AUTh Library subscriptions: ProQuest Central
Alma/SFX Local Collection

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Does Corporate Governance Matter to Bondholders?

Copyright © School of Business Administration, University of Washington 2005 ;Copyright 2005 School of Business Administration ;Copyright University of Washington, School of Business Administration Dec 2005 ;ISSN: 0022-1090 ;EISSN: 1756-6916 ;DOI: 10.1017/S0022109000001940 ;CODEN: JFQAAC

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