Creditor Control of Corporate Acquisitions

Autor:	Thomas P. Griffin, David A. Becher, Greg Nini
Rok vydání:	2021
Předmět:	Finance Economics and Econometrics Creditor business.industry Control (management) Covenant Contractual rights Bargaining power Loan Accounting Agency (sociology) Business Stock (geology)
Zdroj:	The Review of Financial Studies. 35:1897-1932
ISSN:	1465-7368 0893-9454
DOI:	10.1093/rfs/hhab075
Popis:	We examine the impact of creditor control rights on corporate acquisitions. Nearly 75$\%$ of loan agreements include restrictions that limit borrower acquisition decisions throughout the life of the contract. Following a financial covenant violation, creditors use their bargaining power to tighten these restrictions and limit acquisition activity, particularly deals expected to earn negative announcement returns. Firms that do announce an acquisition after violating a financial covenant earn 1.8$\%$ higher stock returns, on average, and do not pursue less risky deals. We conclude that creditors use contractual rights and the renegotiation process to limit value-destroying acquisitions driven by managerial agency problems.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::e0bd9651648a2cadda55ffae6901db96 https://doi.org/10.1093/rfs/hhab075 Zobrazit plný text záznamu