The rise of covenant-lite bond contracting

dc.contributor.authorGietzmann, M.
dc.contributor.authorIsidro, H.
dc.contributor.authorRaonic, I.
dc.date.accessioned2021-02-11T12:52:04Z
dc.date.available2021-02-11T12:52:04Z
dc.date.issued2023
dc.date.updated2023-09-04T16:53:47Z
dc.description.abstractWe investigate the trading and yield effects of covenant-lite (cov-lite) high-yield bond contracts, which have a restricted (lite) set of covenants. The excluded covenants often are those that use accounting performance measures. Although much research has focused on the potential benefits of accounting as a basis for debt contracting, little is known about settings where it may be optimal to exclude accounting performance statistics from public debt contracts. We find that cov-lite high-yield bonds have a higher trading turnover and lower yield spreads. Our findings provide empirical support for theory, which predicts, for optimal bond covenant design, that a trade-off between improving trading ease versus enhanced investor protection needs to be managed. These results enhance our understanding of the limits of accounting’s role in (bond) contracting design.eng
dc.description.versioninfo:eu-repo/semantics/acceptedVersion
dc.identifier.citationGietzmann, M., Isidro, H., & Raonic, I. (2023). The rise of covenant-lite bond contracting. Journal of Accounting, Auditing and Finance, 38(3), 483-509. https://doi.org/10.1177/0148558X20987384
dc.identifier.doi10.1177/0148558X20987384
dc.identifier.issn0148-558X
dc.identifier.urihttp://hdl.handle.net/10071/21988
dc.journalJournal of Accounting, Auditing and Finance
dc.language.isoeng
dc.number3
dc.pagination483 - 509
dc.peerreviewedyes
dc.publisherSage
dc.relationinfo:eu-repo/grantAgreement/FCT/6817 - DCRRNI ID/UID%2FGES%2F00315%2F2019/PT
dc.relationinfo:eu-repo/grantAgreement/FCT/6817 - DCRRNI ID/UIDB%2F00315%2F2020/PT
dc.rightsopen access
dc.subjectCovenantseng
dc.subjectDebteng
dc.subjectRiskeng
dc.subjectTurnovereng
dc.subjectTrading volumeeng
dc.subjectControl rightseng
dc.subject.fosDomínio/Área Científica::Ciências Sociais::Economia e Gestãopor
dc.titleThe rise of covenant-lite bond contractingeng
dc.typearticle
dc.volume38
degois.publication.firstPage1
degois.publication.lastPage27
degois.publication.titleThe rise of covenant-lite bond contractingeng
dspace.entity.typePublicationen
iscte.alternateIdentifiers.scopus2-s2.0-85100006108
iscte.alternateIdentifiers.wosWOS:WOS:000618469800001
iscte.identifier.cienciahttps://ciencia.iscte-iul.pt/id/ci-pub-79165
iscte.journalJournal of Accounting, Auditing and Finance
iscte.subject.odsEducação de qualidadepor
iscte.subject.odsIndústria, inovação e infraestruturaspor

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