Transcript Comments on Fred Tung, “LEVERAGE IN THE BOARD ROOM: …

Comments on Fred Tung,
“LEVERAGE IN THE BOARD ROOM:
THE UNSUNG INFLUENCE OF
PRIVATE LENDERS IN CORPORATE
GOVERNANCE”
Eric Talley
UC Berkeley
Four Principal Questions/Challenges
1.
2.
Situating the Contribution: How uncharted is the
approach of viewing the rights of debt holders (esp.
bank debt; others too) qua corporate governance
(e.g., Jensen ’86; Welch ’97; Gilson ‘07)?
Situating the Comparison: What’s the most apt locus
for comparison of organizational types?
– Private Lender vs. Independent Director?
– Or, Private Lender vs. Institutional SH?
3.
Governance “Portfolios”: Are SH and Creditor
governance mechanisms substitutes? Complements?
(e.g., Cremers et al ’06); Effect of inv’t hedging?
What about output mkts? Input mkts?
4.
Identification Strategy: Endogeneity of governance
terms (e.g., covenants, info. access, incentives,
expertise, enforcement) for both SH & Creditors
– Problem may be especially pronounced when renegotiation
rampant, and where accounting manipulation likely
– Acknowledged in parts, but treated as primitives elsewhere
NIE and Debt Holder
Normative Implications?
Governance
Can FT answer?
Institutional Constraints
• Default/Imm. Rules/Stds
• Legal / Equ. Remedies
• Proc / Defendant Diffs
• Cap. Structure Position
Organizational Constraints
• Organizational Task
• Initial Distrib of Info.
• Distrib of Skills/Capital
• Distrib of Barg. Power
Primitives
“Governance”
• Capital Structure
• CF / Control Rights
• Trumping Rights
• Covenants
• Spec. Investments
• Access to Info.
• Exec. Comp.
• Commitment/Reneg
Endogenous
Governance
Mechanisms
Performance &
Outcomes
(Earnings, Sales,
ROA, ROE, Q,
Renegotiation,
Violation)
Firm Performance