Do Country-level Investor Protections Affect Security-level Contract Design? Evidence from Foreign Bond Covenants

• 成果类型: Article
• 署名作者: Miller, Darius P.; Reisel, Natalia
• 署名单位: Southern Methodist University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhr097
• 发表日期: 2012
• 页码: 408
• 关键词: limited dependent variables; corporate governance; bank loans; Ownership structure; financial-markets; Emerging markets; Creditor rights; Agency problems; equity; debt

摘要

This article studies the ability of security-level contracts to substitute for poor country-level investor protections. Using a cross-country sample of restrictive covenants, we find that bond contacts are more likely to include covenants when creditor protection laws are weak. Further, the use of restrictive covenants in weak creditor protection countries is associated with a lower cost of debt. We also find that strong country-level shareholder rights are not necessarily harmful to bondholders. Overall, the findings suggest that issuers and investors can create international contracts that overcome some of the deficiencies of country-level investor protections and facilitate access to external finance. (JEL F30, G30, G34)