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Frederick Tung -Leverage in the Board Room: The Unsung Influence of Private Lenders in Corporate Governance:: SSRN - UCLA Law Review, Vol. 57, 2009 (rev'd 2012)
Boston University School of Law --:The influence of banks and other private lenders pervades public companies. From the first day of a lending arrangement, loan covenants and built-in contingency provisions affect managerial decision making. Conventional corporate governance analysis has been slow to notice or account for this lender influence. Corporate governance discourse has traditionally focused only on corporate law arrangements. The few existing accounts of creditors' influence over firm managers emphasize the drastic actions creditors take in extreme cases - when a firm is in serious trouble - but in fact, private lender influence is a routine feature of corporate governance even absent financial distress. (..) I explain the regularity of lender influence on managerial decision making - "lender governance" - comparing this routine influence to conventional governance arrangements and boards of directors in particular. I show that the extent of private lender influence rivals that of conventional governance mechanisms, and I discuss the doctrinal and policy implications of this unsung influence. Accounting for lender governance requires a new examination of corporate fiduciary duties, debtor-creditor laws, and the regulatory reform proposals that have emerged to address the current financial crisis. I also discuss the implications of private lender influence for future corporate governance research. -- PDF File: 69 -- lender governance, corporate governance, covenants, credit agreement, private lender, private debt, creditor, financial regulation, financial crisis -- saved to briefcase
article  SSRN  corporate_finance  corporate_governance  creditors  banking  relationship_lending  financial_regulation  corporate_law  capital_markets  commercial_law  debtors  debtor-creditor  debt-restructuring  financial_crisis  finance_capital  corporate_control 
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