Measuring the probability of financial covenant violation in private debt contracts

• 成果类型: Article
• 署名作者: Demerjian, Peter R.; Owens, Edward L.
• 署名单位: University of Washington; University of Washington Seattle; Emory University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.11.001
• 发表日期: 2016
• 关键词: accounting standards; performance; AGREEMENTS; accruals; IMPACT; conservatism; INFORMATION; selection; benefits; leverage

摘要

We measure the probability that a borrower will violate financial covenants in private debt contracts. We analyze hand-coded data and specify standard covenant definitions using Compustat data that minimize measurement error for all individual Dealscan covenants. We use these definitions to create a measure of aggregate probability of violation, which can be used across all covenants in a loan or among covenant subsets of interest. We provide evidence that our aggregate probability measure is superior to alternatives used in prior literature. (C) 2015 Elsevier B.V. All rights reserved.