Creditor Control Rights and Board Independence

Creditor Control Rights and Board Independence

Daniel Ferreira, Miguel Ferreira, Beatriz Mariano

Series number :

Serial Number: 

Date posted :

June 14 2014

Last revised :

October 11 2017
SSRN Share


  • Corporate boards • 
  • Corporate governance • 
  • Covenant violations

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.

Published in

Published in: 
Publication Title: 
Journal of Finance
Volume 73, Issue 5, October 2018, Pages 2385-2423


Real name:
Beatriz Mariano