More from these Authors

• Article | Journal of Corporate Finance | October 2020

  Corporate Legal Structure and Bank Loan Spread

  Anywhere (Siko) Sikochi

  This study examines how a corporate legal structure may affect borrowing costs. Corporate legal structure refers to the legal fragmentation of a firm into multiple, separately incorporated entities. This fragmentation is bound to be a factor when lenders determine the pricing of debt and design of contract terms because they can enter into legally enforceable agreements only with specific legal entities. Using a sample of bank loans issued to U.S. parent companies, I find that a more complex corporate legal structure is associated with higher loan spreads. The findings are robust to several firm and loan characteristics, and are incremental to the effects of other forms of organizational structure, namely business and geographic diversification. I also subject the results to tests to correct for potential endogeneity concerns. I also find that the level of debt at subsidiaries affects the parent company's borrowing costs. However, the subsidiary debt does not moderate the relationship between legal structure and borrowing costs. Evidence suggests that this is, at least partly, explained by recovery costs. There is also some evidence that a corporate legal structure affects the design of the debt contracts.

  Keywords: corporate legal structure; subsidiaries; Bank loans; minority interest; credit risk; Organizational Structure; Business Subsidiaries; Financing and Loans;

  Citation:

  Sikochi, Anywhere (Siko). "Corporate Legal Structure and Bank Loan Spread." Journal of Corporate Finance 64 (October 2020).  View Details

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• Article | Journal of Corporate Finance | October 2020

  Peer Influence on Trade Credit

  Daniel Gyimah, Michael Machokoto and Anywhere (Siko) Sikochi

  We examine the influence of peer firms on trade credit policies of listed firms in the United States. We posit and find evidence that firms mimic their peers in formulating trade credit policies. The findings are more pronounced for firms in highly competitive product markets. Our results also show that firms not only mimic peers in similar circumstances, but they also mimic their more and/or less successful peer firms. These within-group and bidirectional effects highlight the importance of trade credit as a competitive tool in the product markets. Our results are robust to different methods of selecting peers, sampling, different proxies, and estimation techniques.

  Keywords: trade credit; peer effects; product market competition; Trade; Credit; Policy; Competition;

  Citation:

  Gyimah, Daniel, Michael Machokoto, and Anywhere (Siko) Sikochi. "Peer Influence on Trade Credit." Journal of Corporate Finance 64 (October 2020).  View Details

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• Case | HBS Case Collection | March 2020 (Revised September 2020)

  Board Director Dilemmas—Digging into Detail

  David G. Fubini, Suraj Srinivasan and Amram Migdal

  This case explores a new board director who asks a detailed question about a footnote in the lengthy board packet distributed to directors by management. The case allows for discussion about the amount of information and level of detail provided by management, the level of preparation directors engage in prior to board meetings, and the appropriate strategic focus of the board. This case is part of a series of vignettes that capture different dilemmas faced by directors as they join boards of companies and understand the dynamics of the new boards that they join.

  Keywords: board of directors; Corporate Governance; Governing and Advisory Boards;

  Citation:

  Fubini, David G., Suraj Srinivasan, and Amram Migdal. "Board Director Dilemmas—Digging into Detail." Harvard Business School Case 120-100, March 2020. (Revised September 2020.)  View Details

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