IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v40y2005i04p693-719_00.html
   My bibliography  Save this article

Does Corporate Governance Matter to Bondholders?

Author

Listed:
  • Klock, Mark S.
  • Mansi, Sattar A.
  • Maxwell, William F.

Abstract

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.

Suggested Citation

  • Klock, Mark S. & Mansi, Sattar A. & Maxwell, William F., 2005. "Does Corporate Governance Matter to Bondholders?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(4), pages 693-719, December.
    • Handle: RePEc:cup:jfinqa:v:40:y:2005:i:04:p:693-719_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109000001940/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:40:y:2005:i:04:p:693-719_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.