Abstract: The ongoing Voice versus Exit debate, which tries to find the most effective way for an investor to influence firm behaviour, for the vast majority of published research focuses on existing equity shareholders. This neglects debt capital, which due to its refinancing cycle represents a key lever for investors which aim to have an impact. This paper first develops a new additional mechanism, Denial of (Re)Entry, and subsequently assesses all investor impact mechanisms in terms of power of Voice, influence on cash flow, and influence on security price across the two asset classes: debt and equity. We distinguish between different points in the (re)financing cycle, namely pre initial issuance, post issuance and pre subsequent issuances. We find that the highest Voice power for an investor is Threat of Denial pre refinancing of debt capital. Debt Denial has a direct cash flow effect which is particularly strong when the company needs to repay existing debt coming towards the end of its maturity. We suggest investors strategically make use of this key moment to influence by threatening to deny fresh cash unless Paris-Alignment is ensured by imposing a sustainability-linked covenant with a significant penalty if failing to meet the set target.
