We examine how firms' contractual relationships with their employees affect the design of their debt contracts, and their use of financial covenants and pricing grids in particular. Viewing the firm as nexus of both explicit and implicit contractual relationships, we argue that managers...

We examine how income taxes—both managerial and corporate—influence the design of firms’ debt contracts and their use of financial covenants in particular. Both levels of taxation have the potential to exacerbate conflicts of interest among creditors, shareholders, and managers and,...