Drawing on corporate law literature, the essay argues that while contractual means is a protection mechanism available to creditors, they are not sufficient on their own. The paper introduces the arguments put forth by advocates of leaving creditor protection against directorial failings to...

Within the same debt contract, some financial covenants are considerably more restrictive than others. I exploit this heterogeneity in covenant design and show that the design of the most restrictive covenant is systematically associated with covenant outcomes - compliance, violations, or...

Using a large sample of private debt renegotiations from 1996 to 2011, we report that, even in the absence of any covenant violation, debt covenants are frequently renegotiated. These renegotiations primarily relax existing restrictions and result in economically large changes in existing...