Journal of Financial Services Research

, Volume 47, Issue 2, pp 203–228 | Cite as

Creditor Intervention, Investment, and Growth Opportunities

  • Beatriz Mariano
  • Josep A. Tribó GinéEmail author


We show that creditors do not just ensure that inefficient investment is not undertaken, but also do not preclude efficient investment. Examining what happens following a debt covenant violation, a situation through which creditors acquire some control rights over the firm, we find that investment declines when the firm has few growth opportunities but it may increase otherwise. The results are robust to the use of different proxies for growth opportunities. The firm’s performance improves but it suffers dividend cuts and increased CEO turnover. The results suggest that creditors consider the benefits of growth opportunities as a source of future cash flows to meet outstanding debt obligations.


Covenants Growth opportunities Investment Performance Syndicated loans 

JEL classification

G21 G32 


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.London School of EconomicsLondonUK
  2. 2.Economía de la EmpresaUniversidad Carlos III de MadridGetafeSpain

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