Co-opted boards and capital structure dynamics
dc.cclicence | CC-BY-NC | en |
dc.contributor.author | Lartey, Theophilus | |
dc.contributor.author | Danso, Albert | |
dc.contributor.author | Agyenim, Boateng | |
dc.date.acceptance | 2021-06-22 | |
dc.date.accessioned | 2021-06-29T10:19:27Z | |
dc.date.available | 2021-06-29T10:19:27Z | |
dc.date.issued | 2021-06-25 | |
dc.description | The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link. | en |
dc.description.abstract | This study examines the effects of co-opted directors and further tests the monitoring effectiveness of non-co-opted independent directors and co-opted independent directors on capital structure decisions. Employing a large sample of 2,548 US firms over the 1996-2015 period, we find strong evidence that co-opted boards exert a positive and significant influence on firms’ financial leverage. We also find that, whereas co-opted independent directors are positively associated with financial leverage, non-co-opted independent directors have a negative influence on a firm’s leverage ratio, suggesting that co-option weakens the effective monitoring, thereby increasing the firm’s leverage ratio. Further analysis indicates that co-opted boards adjust towards target leverage levels at a faster speed, with a half-life within a year for book and market leverage. Lastly, our results show that the agency costs of managerial discretion and stockholder-bondholder conflicts arising from board co-option are important drivers of financial leverage relative to tax incentives. Our results are robust to alternative measures of board co-option, financial leverage, and endogeneity concerns. | en |
dc.funder | No external funder | en |
dc.identifier.citation | Lartey, T., Danso, A. and Boateng, A. (2021) Co-opted boards and capital structure dynamics. International Review of Financial Analysis, 77, 101824. | en |
dc.identifier.doi | https://doi.org/10.1016/j.irfa.2021.101824 | |
dc.identifier.issn | 1059-0560 | |
dc.identifier.uri | https://dora.dmu.ac.uk/handle/2086/21063 | |
dc.language.iso | en | en |
dc.peerreviewed | Yes | en |
dc.publisher | Elsevier | en |
dc.researchinstitute | Finance and Banking Research Group (FiBRe) | en |
dc.subject | Co-opted boards | en |
dc.subject | Leverage | en |
dc.subject | Adjustment speed | en |
dc.subject | Tax benefits | en |
dc.subject | Financial crisis | en |
dc.title | Co-opted boards and capital structure dynamics | en |
dc.type | Article | en |