20 research outputs found
Three Futures for Postcrisis Banking in the Americas: The Financial Trilemma and the Wall Street Complex
Representatividade e inovação na governança dos processos participativos: o caso das organizações Brasileiras de agricultores familiares
Does Islamic Microfinance Go beyond the Self-employability? An Appraisal from Lahore, Pakistan
Information problems, crowdfunding and debt decision for business start-upsLes problémes informationnels, financement participatif et décision d'endettement pour la création d'entreprise
Lending to the Unbankable - Dynamic Incentives and Joint Liability in a Trust Game with Social Collateral
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Creditor intervention, investment, and growth opportunities
We show that creditors do not just ensure that inefficient investment is not undertaken, but also do not preclude efficient investment. Examining what happens following a debt covenant violation, a situation through which creditors acquire some control rights over the firm, we find that investment declines when the firm has few growth opportunities but it may increase otherwise. The results are robust to the use of different proxies for growth opportunities. The firm's performance improves but it suffers dividend cuts and increased CEO turnover. The results suggest that creditors consider the benefits of growth opportunities as a source of future cash flows to meet outstanding debt obligations