Template-Type: ReDIF-Paper 1.0
Author-Name: Schauten, M.B.J.
Author-Name-Last: Schauten
Author-Name-First: Marc
Author-Name: van Dijk, D.J.C.
Author-Name-Last: van Dijk
Author-Name-First: Dick
Author-Person: pva27
Title: Corporate Governance and the Cost of Debt of Large European Firms
Abstract: This paper examines the effects of different corporate governance mechanisms on the cost of debt for large European firms and documents a novel interaction effect between shareholder rights and disclosure. Improved disclosure leads to a lower credit spread only if shareholder rights are low. A possible explanation for this finding is the ‘share rights or disclose’ hypothesis. If shareholders have sufficient rights to monitor and influence management decisions, debt providers can rely upon shareholders to mitigate agency costs. Otherwise, bondholders require a premium to compensate for the information risk due to uncertainty about the true value of the firm.
Creation-Date: 2010-06-02
File-URL: https://repub.eur.nl/pub/19679/ERS-2010-025-FA.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2010-025-F&A
Classification-JEL: G3, M, O16
Keywords: agency costs, corporate governance, cost of debt, disclosure, information risk, interaction effect, shareholder rights
Handle: RePEc:ems:eureri:19679