Estimating the Benefits of Contractual Completeness

• 成果类型: Article
• 署名作者: Matvos, Gregor
• 署名单位: University of Chicago; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hht060
• 发表日期: 2013
• 页码: 2798
• 关键词: capital structure; Control rights; RENEGOTIATION; constraints; INFORMATION; INVESTMENT; welfare; DESIGN; firm

摘要

I provide a revealed-preference-based framework that uses covenant prices and choices to quantitatively study how covenants generate firm benefits by completing debt contracts. I use a rational-expectations-based panel estimator of covenant prices, which does not require quasi-experimental variation, to circumvent the problem of endogenous covenant choices. I find that firms' surpluses exceed the spread paid on a loan. Leverage and interest-rate covenants produce the largest benefits, lending quantitative credence to several standard theories of covenants. Once covenants are chosen, the benefits from fine-tuning them are small, thus rationalizing boilerplate covenants. I conclude by discussing the extensions and limitations of my method.