This study examines the impact of the presence of institutional dual‐holders, whose portfolios hold both loans and equity securities of the same firms, on those firms' voluntary disclosures. Using mergers between institutional shareholders and lenders to the same firms as exogenous shocks to identify firms with institutional dual‐holders that have high relative equity ownership, we document that such firms are less likely to provide management forecasts and disclose fewer voluntary 8‐K items. In cross‐sectional analyses, we find that the reduction in voluntary disclosures is more pronounced when institutional dual‐holders have higher board representation and when firms have lower litigation risk. In addition, we find that firms with institutional dual‐holders provide more private disclosures to their lenders via loan contract covenants. Additional analyses indicate that the impact of institutional dual‐holders on corporate disclosures is driven by both their monitoring and trading incentives.

Traditionally, fiduciaries' duty of loyalty requires them not to pursue business opportunities that could benefit their own companies. However, starting with Delaware in 2000, several states began allowing companies to waive this duty. We find that the debt structure of firms in waiver-adopting states shifts from public debt to bank debt, suggesting that these firms rely on more intense bank monitoring to address potential managerial disloyalty. The shift is more pronounced for firms with CEOs who are more likely to appropriate business opportunities and less pronounced for firms with stronger shareholder monitoring. We also find that bank debt mitigates the adverse effect of corporate opportunity waivers on shareholder wealth, the stock market reacts positively to the bank debt issuances of firms affected by these waivers, and corporate opportunity waiver laws increase the total debt market funding costs for affected firms. Collectively, our paper provides novel evidence that firms seek creditor governance to mitigate the loss of internal governance resulting from changes in the legal environment.

This study investigates the adoption and implications of Accounting Standards Codification (ASC) 842 lease accounting standards in private loan contracts. Analyzing a comprehensive sample of material loan contracts from 2011 to 2023, we document a pervasive reluctance to adopt ASC 842. Specifically, we find that for loans issued prior to, but maturing after, the standard effective date, only 41% of loans adopt the standard. For loans issued after the standard effective date, only 46% of loans adopt the standard. Our determinants analyses reveal that for loans issued prior to the effective date, the reluctance to adopt ASC 842 is associated with (1) a preference for using consistent lease classifications over time, (2) concerns about borrower opportunism, and (3) the costs of negotiating or renegotiating lease‐related loan terms within lending syndicates. In contrast, for loans issued after the effective date, only negotiation costs are associated with the reluctance to adopt. Our findings suggest that the costs of adopting ASC 842 in private loan contracts often outweigh the benefits and that contracting parties prefer a stable accounting standard environment.