In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an...

U.S. firms lease assets extensively. We find that, during 1980–2011, the average U.S. firm has a lease intensity of about 40%. Or, the average firm has present and future (up to five years) rent commitments equal to 16.6% of their total assets. We investigate whether agency costs between the...

We examine the influence of political rights on the implied cost of equity capital using a sample of firms from 44 countries. We find that firms' equity financing costs are lower when political rights are stronger. We further find that political institutions' direct impact on the cost of equity...

We use China as a laboratory to test the effect of government quality on cash holdings. We build on, and extend, the existing literature on government expropriation and its interaction with firm-level agency problems by proposing a financial constraint mitigation argument. We find that firms...

We study how sovereign wealth fund (SWF) investments affect the credit risk of target companies as measured by the change in their credit default swap (CDS) spreads around the investment announcement. We find that the CDS spread of target companies decreases, on average, following an SWF...

This paper develops a model of debt renegotiation in a structural framework that accounts for taxes, bankruptcy costs and renegotiation costs. To our knowledge, all the previous work on debt renegotiation implies an infinite number of renegotiations. This feature preempts the analysis of the...

We examine the prevalence and performance impact of controlling shareholders and study corporate board structures and ownership structures in 1796 Indian firms. Families (founders) are present on the boards in 63.2 (65.5) percent of the sample firms. On average, founders own over 50% of...

Using euro area firm-level data since the recent financial crisis, we test whether bank lending constrained small- and medium-sized enterprises (SMEs) are more likely to use or apply for alternative external finance including trade credit, informal lending, loans from other companies, market...

Using a comprehensive sample of securities litigation, we examine the effect of financial fraud on the subsequent use of external financing. We find that firms with a recent history of securities litigation, particularly more severe litigation, are less likely to seek external debt and equity...

Are restrictive covenants effective mechanisms in mitigating agency problems? Is the magnitude of the increase in the cost of debt due to agency problems non-trivial? We tackle these questions using a large dataset of public bonds. Contrary to the view that restrictive covenants in public bond...