Discussion of 'Borrower Private Information Covenants and Loan Contract Monitoring'

Carrizosa and Ryan (2017) explore the use of private information covenants, which contractually oblige borrowers to provide their lenders with private information: projected or intra-quarter financial statements. The authors offer evidence that creditors acquire private information about borrowers via information covenants after a contract is in place. This in turn facilitates the creditor monitoring process, subject to a cost-benefit tradeoff. I discuss how the study fits into the literature and provide additional perspective on some of its arguments. I contend that the cost side and hence the trade-offs associated with information covenants are less clear and have yet to be established empirically. I discuss complementary information mechanisms that deserve attention and raise several research design issues. I also argue that the study can shed light on an open question in the disclosure literature