Bond Covenants and Delegated Monitoring.
This paper examines alternative contracting arrangements available to a firm seeking to finance an investment project. The authors consider the choice between loan contracts with covenants bas ed on noisy indicators of the firm's financial health and loan contra cts enforced by a monitoring specialist. In one interpretation, the s pecialist is a financial intermediary. The firm's choice is shown to depend upon the firm's credit rating, the accuracy of financial indic ators of the firm's condition, the loss from premature liquidation of the firm's project, and the cost of monitoring. Copyright 1988 by American Finance Association.
Year of publication: |
1988
|
---|---|
Authors: | Berlin, Mitchell ; Loeys, Jan |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 43.1988, 2, p. 397-412
|
Publisher: |
American Finance Association - AFA |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The choice between bonds and bank loans
Berlin, Mitchell, (1986)
-
The choice between bonds and bank loans
Berlin, Mitchell, (1986)
-
Bond covenants and delegated monitoring
Berlin, Mitchell, (1988)
- More ...