How does financing impact investment? The role of debt covenants

• 成果类型: Article
• 署名作者: Chava, Sudheer; Roberts, Michael R.
• 署名单位: Texas A&M University System; Texas A&M University College Station; Mays Business School; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2008.01391.x
• 发表日期: 2008
• 页码: 2085-2121
• 关键词: agency costs; corporate-finance; earnings; firm; constraints; VIOLATIONS; reputation; accruals; QUALITY

摘要

We identify a specific channel (debt covenants) and the corresponding mechanism (transfer of control rights) through which financing frictions impact corporate investment. Using a regression discontinuity design, we show that capital investment declines sharply following a financial covenant violation, when creditors use the threat of accelerating the loan to intervene in management. Further, the reduction in investment is concentrated in situations in which agency and information problems are relatively more severe, highlighting how the state-contingent allocation of control rights can help mitigate investment distortions arising from financing frictions.