The rise of covenant-lite bond contracting
Autor(a) principal: | |
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Data de Publicação: | 2021 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10071/21988 |
Resumo: | 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. |
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The rise of covenant-lite bond contractingCovenantsDebtRiskTurnoverTrading volumeControl rightsWe 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.Sage2021-02-11T12:52:04Z2023-01-01T00:00:00Z20232023-09-04T16:53:47Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10071/21988eng0148-558X10.1177/0148558X20987384Gietzmann, M.Isidro, H.Raonic, I.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:52:18Zoai:repositorio.iscte-iul.pt:10071/21988Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:26:02.952594Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
The rise of covenant-lite bond contracting |
title |
The rise of covenant-lite bond contracting |
spellingShingle |
The rise of covenant-lite bond contracting Gietzmann, M. Covenants Debt Risk Turnover Trading volume Control rights |
title_short |
The rise of covenant-lite bond contracting |
title_full |
The rise of covenant-lite bond contracting |
title_fullStr |
The rise of covenant-lite bond contracting |
title_full_unstemmed |
The rise of covenant-lite bond contracting |
title_sort |
The rise of covenant-lite bond contracting |
author |
Gietzmann, M. |
author_facet |
Gietzmann, M. Isidro, H. Raonic, I. |
author_role |
author |
author2 |
Isidro, H. Raonic, I. |
author2_role |
author author |
dc.contributor.author.fl_str_mv |
Gietzmann, M. Isidro, H. Raonic, I. |
dc.subject.por.fl_str_mv |
Covenants Debt Risk Turnover Trading volume Control rights |
topic |
Covenants Debt Risk Turnover Trading volume Control rights |
description |
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. |
publishDate |
2021 |
dc.date.none.fl_str_mv |
2021-02-11T12:52:04Z 2023-01-01T00:00:00Z 2023 2023-09-04T16:53:47Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10071/21988 |
url |
http://hdl.handle.net/10071/21988 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
0148-558X 10.1177/0148558X20987384 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Sage |
publisher.none.fl_str_mv |
Sage |
dc.source.none.fl_str_mv |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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