Please use this identifier to cite or link to this item:
http://hdl.handle.net/10071/21988
Author(s): | Gietzmann, M. Isidro, H. Raonic, I. |
Date: | 2023 |
Title: | The rise of covenant-lite bond contracting |
Journal title: | Journal of Accounting, Auditing and Finance |
Volume: | 38 |
Number: | 3 |
Pages: | 483 - 509 |
Reference: | Gietzmann, 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 |
ISSN: | 0148-558X |
DOI (Digital Object Identifier): | 10.1177/0148558X20987384 |
Keywords: | Covenants Debt Risk Turnover Trading volume Control rights |
Abstract: | We 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. |
Peerreviewed: | yes |
Access type: | Open Access |
Appears in Collections: | BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica |
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article_79165.pdf | 547,12 kB | Adobe PDF | View/Open |
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