TY  - BOOK
AU  - Mansi,Sattar A.
AU  - Maxwell,  William F.
AU  - Wald, John K.
TI  - Creditor protection laws and the cost of debt
SN  - 00222186
AV  - HB73 JOU 
PY  - 2009///
CY  - Chicago
PB  - University of Chicago Press
KW  - Business structures
KW  - Credit ratings
KW  - Debt
KW  - Debt financing
KW  - Financial leverage
KW  - Incorporation
KW  - Outstanding debt
KW  - State law
N2  - We examine the impact of state payout restrictions on firms' credit ratings and bond yields. Using publicly traded bond data for a sample of large firms, we find that firms incorporated in states with more restrictive payout statutes (for example, New York and California) have better credit ratings and significantly lower yield spreads (about 8.7 percent) than do firms incorporated in less restrictive states (for example, Delaware). These results suggest that incorporation in a more restrictive state provides a credible commitment mechanism for avoiding some of the moral hazard problems associated with long‐term debt. This commitment corresponds to an economically and statistically significant difference in market yields and firm‐financing costs and is robust to controls for ownership, governance, debt type, Delaware or non‐Delaware incorporation, and covenant usage. Overall, our results are consistent with the notion that Delaware incorporation has hidden costs for some firms
UR  - https://doi.org/10.1086/605566
ER  -