Michael Roberts from the University of Pennsylvania (the Wharton School) is giving a VGSF research seminar on "Control Rights and Capital Structure: An Empirical Investigation" on WEDNESDAY, May 9th, from 16:00 to 17:30 in SR 1 (Seminarraum 1) at the BWZ, Brünnerstrasse 72, 1210 Wien. See the VGSF webpage (Activities & Events --> Research Seminars) for a map of the location, the paper to download (soon) and this term's entire schedule of seminars.

Please find the paper's abstract below. Michael Roberts is going to be in Vienna until Friday morning. He would be very happy to discuss research with the local faculty. Please contact Michael Halling if you are interested and would like to take advantage of this opportunity.

Best, Michael Halling

Abstract We show that a large number of financing decisions of solvent firms are dictated by creditors, who use the transfer of control rights accompanying financial covenant violations to address incentive conflicts between managers and investors. After showing that financial covenant violations occur among almost one third of all publicly listed firms, we find that creditors use the threat of accelerating the loan to reduce net debt issuing activity by over 2% of assets per annum immediately following a covenant violation. Further, this decline is persistent in that net debt issuing activity fails to return to pre-violation levels even after two years, resulting in a gradual decline in leverage of almost 3%. These findings represent the first, of which we are aware, piece of empirical evidence highlighting the role of control rights in shaping corporate financial policies outside of bankruptcy.