Hypotheses - Effects of creditor structure on performance and other incentive mechanisms in corporate governance

Table: Hypotheses - Effects of creditor structure on performance and other incentive mechanisms in corporate governance

Click here to see an exhibition on these issues and their relation to other hypotheses in corporate governance.

3) From creditor structure to corporate performance

3A: Using short-term debt rather than long-term means that the capital market evaluates managers more often because of faster debt roll-over and this may increase financial performance (Shleifer and Vishny [1997, page 757]).

3B: A large creditor may press the management to pursue so safe investments that it hurts long-run profitability. More info.

12) From creditor structure to decision system

12A: Large creditors may sit on the board of directors or otherwise influence the firm’s decision process.

21) From creditor structure to bankruptcy system

21A: A bankrupt firm may have a better chance of being reorganized or being liquidated at fewer costs if it has a few large creditors rather than numerous of small creditors.