Takeover Exposure, Agency, and the Choice between Private and Public Debt
Document Type
Article
Language
eng
Format of Original
32 p.
Publication Date
Summer 2009
Publisher
Wiley
Source Publication
Journal of Financial Research
Source ISSN
0270-2592
Abstract
We examine how governance characteristics are related to the corporate choice between public and private debt. We find that firms with fewer takeover defenses and larger outside blockholder ownership are more likely to borrow from banks and to issue 144A debt.We also document that public debt cost is more sensitive to takeover exposure than bank debt cost. These results are consistent with the hypothesis that banks mitigate the expected negative effect of takeovers on debt value through covenants and debt renegotiations. Moreover, we show that firms with weaker internal monitoring are less likely to borrow from banks.
Recommended Citation
Arena, Matteo and Howe, John S., "Takeover Exposure, Agency, and the Choice between Private and Public Debt" (2009). Finance Faculty Research and Publications. 37.
https://epublications.marquette.edu/fin_fac/37
Comments
Journal of Financial Research, Vol. 32, No. 2 (Summer 2009): 199-230. DOI.