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Full-Text Articles in Business
Does Board Independence Reduce The Cost Of Debt?, Michael Bradley, Dong Chen
Does Board Independence Reduce The Cost Of Debt?, Michael Bradley, Dong Chen
Faculty Scholarship
Using the passage of the Sarbanes-Oxley Act and the associated change in listing standards as a natural experiment, we find that while board independence decreases the cost of debt when credit conditions are strong or leverage low, it increases the cost of debt when credit conditions are poor or leverage high. We also document that independent directors set corporate policies that increase firm risk. These results suggest that, acting in the interest of shareholders, independent directors are increasingly costly to bondholders with the intensification of the agency conflict between these two stakeholders.
Private Equity Firms As Gatekeepers, Elisabeth De Fontenay
Private Equity Firms As Gatekeepers, Elisabeth De Fontenay
Faculty Scholarship
Notwithstanding the considerable attention private equity receives, there continues to be substantial confusion about what private equity does and whether this creates value. Calls for more aggressive regulation of the industry reflect a skeptical view of private equity as—at best—a zero-sum game, in which profits are generated only at the expense of other constituencies. The standard defense of private equity points to its corporate governance advantages as a source of value. This Article identifies an overlooked and increasingly important way in which private equity creates value: private equity firms act as gatekeepers in the debt markets. As repeat players, private …