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Creditor Control Rights and Board Independence

Ferreira, D., Ferreira, M. and Mariano, B. (2018). Creditor Control Rights and Board Independence. Journal of Finance, 73(5), pp. 2385-2423. doi: 10.1111/jofi.12692


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.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Ferreira, D., Ferreira, M. & Mariano, B. (2017). Creditor Control Rights and Board Independence. Journal of Finance, which is published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: Corporate boards, Corporate governance, Covenant violations
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Date available in CRO: 03 Aug 2017 09:16
Date deposited: 3 August 2017
Date of acceptance: 2 August 2017
Date of first online publication: 21 May 2018
Text - Accepted Version
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