Journal of Accounting and Economics Vol. 64 No. 2-3 2017
Borrower private information covenants and loan contract monitoring
Abstract
We identify covenants in commercial loan contracts that require public borrowers to periodically disclose two types of accounting-related private information to lenders: projected financial statements for future periods and monthly historical financial statements. We hypothesize and provide evidence that: (1) loan contracts include these covenants in settings where they enhance lenders’ loan contract monitoring; (2) the covenants are positively associated with the frequency of loan contract amendments; and (3) lenders trade on the borrower private information they receive in secondary loan markets. We further show that the two types of covenants have predictably different determinants and effects.
- DOI
- 10.1016/j.jacceco.2017.05.004
- Volume
- 64
- Issue
- 2-3
- Pages
- 313-339
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref