We measure the probability that a borrower will violate financial covenants in private debt contracts. We analyze hand-coded data and specify standard covenant definitions using Compustat data that minimize measurement error for all individual Dealscan covenants. We use these definitions to...

Evidence shows that managers' debt-like compensation (i.e., inside debt) aligns their incentives with lenders', reducing the agency cost of debt. We examine how changes in the contracting environment affect the use of inside debt in debt contracting. We find evidence of reduced reliance on...

In this study, we replicate and extend Dichev and Skinner’s [DS: 2002] study on the debt covenant hypothesis (DCH). We start by replicating DS and find results consistent with theirs. We then extend their work by changing three aspects of the research design: histogram bin width, calculation...