Why do loans contain covenants? Evidence from lending relationships

• 成果类型: Article
• 署名作者: Prilmeier, Robert
• 署名单位: Tulane University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.12.007
• 发表日期: 2017
• 页码: 558-579
• 关键词: Relationships; banking; covenants; information asymmetries; Monitoring incentives

摘要

Despite the importance of banks' role as delegated monitors, little is known about how non-price terms of loan contracts are structured to optimize information production in a lending relationship. Using a large sample of corporate loans, this paper examines the effect of relationship lending on covenant choice. Consistent with information asymmetry theories, covenant tightness is relaxed over the duration of a relationship, especially for opaque borrowers. In contrast, the effect of lending relationship intensity on the number of covenants included in a loan follows an inverted U shape. I discuss potential explanations for this finding. (C) 2017 Elsevier B.V. All rights reserved.