This paper examines how loan covenant violations impact firm dividend policy. Using contract-level loan data for nonfinancial firms in the US, this study provides evidence that the occurrence of a covenant violation significantly increases the likelihood of a dividend reduction in the subsequent...

This paper examines how loan covenant violations impact firm dividend policy. Using contract-level loan data for nonfinancial firms in the U.S., this study provides evidence that the occurrence of a covenant violation significantly increases the likelihood of a dividend reduction in the...