Managers, Owners, and the Pricing of Risky Debt: An Empirical Analysis

Bagnani, Elizabeth Strock; Milonas, Nikolaos T.; Saunders, Anthony; Travlos, Nickolaos G.

doi:10.2307/2329159

Cited by 29 publications

(47 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Based on 340 bank-years for 80 unique banks over the period 1994, Faleye and Krishnan (2017, studied the effect of bank governance on risk-taking in commercial lending. Empirical findings indicate that banks with more effective boards are less likely to lend to riskier borrowers.…”

Section: Board Sizementioning

confidence: 99%

Bank Governance, Risk and Bank Insolvency: Evidence from Tunisian Banks

Djebali¹,

Zaghdoudi²

2017

ijafr

View full text Add to dashboard Cite

The aim of this paper is twofold. Firstly, it investigates the effect of bank governance on bank risk measured by the standard deviation of the return on assets (SDROA). Secondly, it tests the relationship between bank governance mechanisms and bank insolvency proxied by the Zscore (ROA). To achieve this goal, we used a sample of 11 Tunisian banks observed during the period 2006-2015. These 11 banks are considered as the most dynamic banks in the Tunisian banking system. The econometric approach used in this study is based on panel data analysis especially fixed and random effect models. Empirical results indicate that the presence of Supervisory Committee and monitoring of risks (COR), the executive compensation (REMB) and the board size (BDSIZE) increases significantly Tunisian bank risk and insolvency. However, the presence of independent directors (INDD) and the proportion of institutional investors decrease bank risk and bank insolvency. With regard to the effect on macroeconomic condition, only inflation rate exerts a significant effect. However, this effect is negative when the dependent variable is SDROA and positive for Z-score. The effect of GDPG is not significant for both bank risk and bank stability.

show abstract

Section: Board Sizementioning

confidence: 99%

Bank Governance, Risk and Bank Insolvency: Evidence from Tunisian Banks

Djebali¹,

Zaghdoudi²

2017

ijafr

View full text Add to dashboard Cite

show abstract

“…1 8 For example, DeFusco et al (1990) and Hjortshøj (2006) study the announcement e¤ect of new option grants. Bagnani, Milonas, Saunders & Travlos (1994) study the relation between bond return premium and managerial ownership using a regression approach.…”

Section: Asset Risk and Industry-adjusted Risk Adjustment Ratiosmentioning

confidence: 99%

Risk Shifting, Debt Governance and Managerial Incentives

Hjortshoj¹,

Wei

2007

SSRN Journal

View full text Add to dashboard Cite

This paper studies the impact of debt governance on …rms' risk shifting behavior. We construct …rm-level debt governance indices using corporate bond indenture provisions, and a market-based risk shifting measure estimated using a contingent-claim framework. We …rst document that …rms with strong debt governance subsequently lower business risk relative to their industry peers, and this relationship mainly exists among …rms with high default probability. Further evidence suggests that debt governance plays an important role in mitigating the impact of managerial risk-taking incentives on risk shifting. Higher sensitivity of CEO wealth to stock volatility (Vega) is signi…cantly positively related to risk shifting, but this e¤ect is signi…cantly weakened when strong debt governance is in place. Also, bondholders appear to bene…t from the impact of debt governance on risk shifting. Higher Vega is associated with higher credit spreads for bonds under weak debt governance. Under strong debt governance, higher Vega is associated with signi…cantly lower credit spreads. JEL classi…cation: G13, G30, G32, J33Keywords: Risk shifting, default risk, debt governance, managerial incentiveThe authors are grateful for helpful comments from Kose John and Peter Tind Larsen. We would also like to thank seminar participants at University of Aarhus. Any remaining errors are the authors'responsibility.

show abstract

“…7 It is possible that, for firms with bonds outstanding, the holdout problems encountered when these firms' debt is held by a large number of diffuse bond investors make strategic default less attractive to shareholders. 8 In the third step, I explore this possibility by examining how the shareholder advantage effect on stock returns is related to financial leverage and renegotiation frictions. 9 The value of the option to strategically default is greater for firms with higher leverage, and the potential for rent extraction due to shareholders' strategic actions is likely to be significant for firms with few renegotiation frictions.…”

Section: Introductionmentioning

confidence: 99%

“…See discussions on the limitation of research in Section 3.7. 8 Theoretical models have argued that the dispersed bond ownership with atomistic bondholders may make bond contracts effectively non-renegotiable (Hege and Mella-Barral (2005) and Bolton and Scharfstein (1996)). 9 Renegotiation frictions measure how easily renegotiations can be carried out.…”

Section: Introductionmentioning

confidence: 99%

Distress Risk Premia in Stock and Bond Returns

Zhang

2011

SSRN Journal

View full text Add to dashboard Cite

Managers, Owners, and the Pricing of Risky Debt: An Empirical Analysis

Cited by 29 publications

References 0 publications

Bank Governance, Risk and Bank Insolvency: Evidence from Tunisian Banks

Bank Governance, Risk and Bank Insolvency: Evidence from Tunisian Banks

Risk Shifting, Debt Governance and Managerial Incentives

Distress Risk Premia in Stock and Bond Returns

Contact Info

Product

Resources

About