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    The Relation between Corporate Governance and Credit Risk, Bond Yields and Firm Valuation

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    SSRN-id1078463.pdf (237.6Kb)
    Links to Files
    http://ssrn.com/abstract=1078463
    Permanent Link
    10.2139/ssrn.1078463
    http://hdl.handle.net/11603/4006
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    • UBalt Faculty Scholarship
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    Author/Creator
    Bradley, Michael
    Chen, Dong
    Dallas, George S.
    Snyderwine, Elizabeth
    Date
    2007
    Type of Work
    71 pages
    Text
    journal articles
    Citation of Original Publication
    Bradley, Michael and Chen, Dong and Dallas, George S. and Snyderwine, Elizabeth, The Relation between Corporate Governance and Credit Risk, Bond Yields and Firm Valuation (December 24, 2007).
    Subjects
    corporate governance
    credit risk
    credit rating
    bond spreads
    Abstract
    This study examines the empirical relations between the governance structure of public corporations in the United States and the rating and pricing of their debt securities. We study an unbalanced panel of 775 unique U.S. firms from 2001 through 2007 and identify several statistically significant relations between corporate governance factors and credit ratings, bond spreads and firm values. We find that credit ratings are negatively related to the presence of antitakeover measures for firms with speculative grade ratings and positively related to the presence of antitakeover measures for firms with investment grade ratings. Moreover, we find that spreads are positively related to the presence of antitakeover measures, and this relation is significantly stronger for firms with less than investment grade credit ratings. Our findings also suggest that more stable boards, defined as having attributes relating to board tenure, director liability indemnification and classified board structures are related to higher credit ratings and lower bond spreads. We conjecture that boards with greater stability may be better positioned to take into consideration the longer term interests of the firm as a whole, thus benefiting the firm's creditors.


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    Robert L. Bogomolny Library
    University of Baltimore
    1420 Maryland Ave.
    Baltimore, MD 21201
    Email: knowledgeworks@ubalt.edu


    If you wish to submit a copyright complaint or withdrawal request, please email mdsoar-help@umd.edu.