Economics, Econometrics and Finance
8 years ago

Corporate governance impacts bondholder wealth and credit risk in financial firms.

Corporate Governance, Credit Risk and Bondholder Wealth
Jun Wang

Paper Summary

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The article explores how corporate governance affects bondholder wealth in US financial and industrial firms. It looks at conflicts between creditors and shareholders, and how governance mechanisms impact default risk and Credit Default Swap spreads. The study shows that governance provisions like board structure and ownership influence a firm's credit risk, with different effects on financial and non-financial firms. For non-financial firms, ownership structure and takeover vulnerability are crucial, while board structure and transparency matter more for financial firms. Overall, governance attributes significantly impact a firm's credit risk, with varying effects depending on the type of firm.