Creditor control rights and board independence

Daniel Ferreira, Miguel A. Ferreira, Beatriz Mariano

Research output: Contribution to journalArticlepeer-review

34 Citations (Scopus)
22 Downloads (Pure)


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.

Original languageEnglish
Pages (from-to)2385-2423
JournalThe Journal of Finance
Issue number5
Publication statusPublished - Oct 2018


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