Building on contract theory, we argue that financial covenants control the conflicts of interest
between lenders and borrowers via two different mechanisms. Capital covenants control …

Using a sample of over 5,000 debt issues, I test whether firms with more extensive use of
covenants in their public debt contracts exhibit timelier recognition of economic losses in …

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 …

We examine the association between real earnings management and the cost of new bond
issues of US corporations. We consider three types of real earnings management: sales …

This paper investigates whether the initiation of trading in credit default swaps (CDSs) on a
borrowing firm׳ s outstanding debt is associated with a decline in that firm׳ s reporting …

Debt contracts often include covenants that are contingent on accounting numbers. These
covenants usually define constraints on a firm's net worth (or tangible net worth), working …

We study the role of goodwill in promoting contracting efficiency and the effect of SFAS 141
and 142 on this role. We provide three main results. First, when a lending agreement …

This study examines the relation between performance covenants in private debt contracting
and conservative accounting under adverse selection. We find that under severe adverse …

We examine if managerial ability affects the efficiency of the contracting environment with
lenders. We find that higher ability alters the balance of information-sensitive covenants …

We study the role of borrowers' balance sheet conservatism (ie, conservatism in asset
values) in debt contract design. We find that borrowing costs are decreasing in the degree of …