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We review the recent theoretical and empirical literature on debt covenants with a particular focus on how creditor governance after covenant violations can influence the borrower's corporate policies. From the theoretical literature, we identify the key trade-offs that help explain the observed...
Persistent link: https://www.econbiz.de/10012842087
We review the recent theoretical and empirical literature on debt covenants with a particular focus on how creditor governance after covenant violations can influence the borrower's corporate policies. From the theoretical literature, we identify the key trade-offs that help explain the observed...
Persistent link: https://www.econbiz.de/10012844499
Persistent link: https://www.econbiz.de/10014506036
Persistent link: https://www.econbiz.de/10003868520
Persistent link: https://www.econbiz.de/10003538055
Using a large sample of bank loans issued to U.S. firms between 1990 and 2004, we find that lower takeover defenses (as proxied by the lower G-index of Gompers, Ishii, and Metrick 2003) significantly increase the cost of loans for a firm. Firms with lowest takeover defense (democracy) pay a 25%...
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