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Financial Flexibility and Manager-Shareholder Conflict: Evidence from REITs
Working Papers
  • Timothy Riddiough, University of Wisconsin-Madison
  • Eva Steiner, Cornell University School of Hotel Administration
Publication Date
We show empirically that the use of unsecured debt, which contains standardized covenants that place limits on total leverage and the use of secured debt, is associated with lower and more stable leverage outcomes. We then show that firm value is sensitive to leverage levels and leverage stability, decreasing in the former and increasing in the latter. Our results suggest that unsecured debt covenants function as a managerial commitment device that preserves the firm’s debt capacity to enhance financial flexibility.

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Copyright held by the authors.

Citation Information

Riddiough, T., & Steiner, E. (2017). Financial flexibility and manager-shareholder conflict: Evidence from REITs [Electronic version]. Retrieved [insert date], from Cornell University, SHA School site: