Covenant Prices of U.S. Corporate Bonds

Lukas Handler; Rainer Jankowitsch; Patrick Weiss

doi:10.1093/rapstu/raag004

Covenant Prices of U.S. Corporate Bonds

Lukas Handler¹; Rainer Jankowitsch²; Patrick Weiss³

¹ WU Vienna University of Economics and Business · ² WU Vienna University of Economics and Business & VGSF , · ³ Reykjavík University

The Review of Asset Pricing Studies 2026 open access

Abstract In this paper, we analyze the key drivers of bond covenant prices by employing a novel measurement approach based on secondary market data. We find that covenant prices vary significantly over time and are associated with market-wide credit risk, volatility, and macroeconomic variables. Apart from the time-series dynamics, there is also significant variation across bond and firm characteristics. In particular, covenant prices increase with the riskiness of bonds and are higher for firms that have more growth options, more tangible assets, and are smaller. Furthermore, we document a positive correlation between the prices of covenants and their subsequent inclusion rates.

DOI: 10.1093/rapstu/raag004
Language: en
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