Managerial Agency and Bond Covenants

• 成果类型: Article
• 署名作者: Chava, Sudheer; Kumar, Praveen; Warga, Arthur
• 署名单位: University of Houston System; University of Houston; Texas A&M University System; Texas A&M University College Station; Mays Business School
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhp072
• 发表日期: 2010
• 页码: 1120
• 关键词: CORPORATE GOVERNANCE; earnings management; determinants; entrenchment; COSTS; debt; OPPORTUNITIES; COMPENSATION; SHAREHOLDERS; INVESTMENT

摘要

Based on an analysis of the agency risk for bondholders from managerial entrenchment and fraud, we derive and test refutable hypotheses about the influence of managerial agency risk on bond covenants, using a comprehensive database of corporate bonds from the 1993-2007 period. Managerial entrenchment and the risk of managerial fraud significantly influence the use of covenants, in the direction predicted by the agency-theoretic framework. Our analysis highlights the varied effects of entrenchment on different types of agency risks faced by bondholders: Entrenched managers aggravate investment risk, but ameliorate risk from shareholder opportunism. Covenant use also responds efficiently to the quality of information available regarding the risk of managerial fraud. (JEL D82, G32. G34)