Strategic Ownership Structure and the Cost of Debt

We theoretically and empirically address the endogeneity of corporate ownership structure and the cost of debt, with a novel emphasis on the role of control concentration in post-default firm restructuring. Control concentration raises agency costs of debt, and dominant shareholders trade off private benefits of control against higher borrowing costs in choosing their ownership stakes. Based on our theoretical predictions, and using an international sample of syndicated loans and unique dynamic ownership structure data, we present new evidence on the firm- and macro-level determinants of corporate control concentration and the cost of debt. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.