How Creditors Affect Corporate Governance

Though the majority of studies in corporate governance focus on the ability of shareholders to advise and monitor firms, debt financing is much more common than equity financing. According to the Thomas Reuters Loan Pricing Corporation, $2 trillion in syndicated loans were issued in 2016, compared with less than $250 billion in net equity. Further, the number of firms issuing debt is a multiple of those issuing public equity. If, as Shleifer and Vishny (1997) argue, “corporate governance deals with the ways in which the suppliers of finance to corporations assure themselves of getting a return on their investment,” then … Read more