We investigate how the role of antitakeover provisions (ATPs) in alleviating the conflict of interests between shareholders and creditors differs between family and nonfamily firms. We find that while nonfamily firms with more ATPs (as measured by G-index) enjoy lower costs of bank loans, family firms with more ATPs pay higher costs of bank loans. The adverse effect of ATPs on the cost of debt for family firms is particularly severe when they are run by nonfounder CEOs. We also find that this result is more pronounced when bank loans are unsecured or have no covenants, when family firms’ nonfounder CEOs are insulated from disciplinary forces (e.g., firms face low product market competition or have low leverage), and when family firms’ nonfounder CEOs are more powerful (e.g., CEOs are the chairmen of the board, are old, or receive high compensation). These results suggest that managerial agency conflicts are an important consideration in examining the effects of ATPs on the cost of debt for family firms and that banks effectively factor in these conflicts when determining loan rates.
Keywords: Antitakeover provisions, Family firms, Creditors, Cost of bank loans, Covenants, Agency conflicts.
JEL Classification: G21, G32, G34
학회소식
[2013년 제 4차] Family Firms, Antitakeover Provisions, and Costs of
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2013-12-16
