Debt covenant design and creditor control rights: Evidence from the tightest covenant

@inproceedings{Wang2017DebtCD,
  title={Debt covenant design and creditor control rights: Evidence from the tightest covenant},
  author={Jing Wang},
  year={2017}
}
Within the same debt contract, some financial covenants are considerably more restrictive than others. I exploit this heterogeneity in covenant design and show that the design of the most restrictive covenant is systematically associated with covenant outcomes - compliance, violations, or renegotiations. Consistent with an alleviation of moral hazard problems, tighter capital expenditure restrictions (performance covenants) are more likely to facilitate ex post creditor control through covenant… CONTINUE READING

Citations

Publications citing this paper.
SHOWING 1-2 OF 2 CITATIONS