COVENANTS AND COLLATERAL AS INCENTIVES TO MONITOR

• 成果类型: Article
• 署名作者: RAJAN, R; WINTON, A
• 署名单位: Northwestern University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.2307/2329346
• 发表日期: 1995
• 页码: 1113-1146
• 关键词: Financial intermediation; Debt covenants; equilibrium

摘要

Although monitoring borrowers is thought to be a major function of financial institutions, the presence of other claimants reduces an institutional lender's incentives to do this. Thus loan contracts must be structured to enhance the lender's incentives to monitor. Covenants make a loan's effective maturity, and the ability to collateralize makes a loan's effective priority, contingent on monitoring by the lender. Thus both covenants and collateral can be motivated as contractual devices that increase a tender's incentive to monitor. These results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending.