Default clauses in debt contracts

• 成果类型: Article
• 署名作者: Li, Ningzhong; Lou, Yun; Vasvari, Florin P.
• 署名单位: University of Texas System; University of Texas Dallas; Hautes Etudes Commerciales (HEC) Paris; University of London; London Business School
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-015-9337-8
• 发表日期: 2015
• 页码: 1596-1637
• 关键词: bankruptcy resolution; incomplete contracts; capital structure; public debt; COSTS; PRIVATE; CHOICE; equity; determinants; liquidation

摘要

We examine the determinants of events of default clauses in syndicated loan and bond contracts, provisions that allow lenders to request the repayment of principal and to terminate lending commitments. We document significant variation in the use of default clauses and their restrictiveness within the same type of lending contract but also across loans and bonds. We find that default clauses in public bond contracts are less restrictive than those in syndicated loan contracts. We also document that two ex ante proxies for bankruptcy costs, the level of intangible assets and capitalized research and development expenditures at the time of debt contracting, are associated with less restrictive default clauses, especially in bond contracts. We conclude that bondholders attempt to mitigate the occurrence of inefficient defaults. Given their inability to coordinate with each other and their ownership of subordinated claims, bondholders incur higher default costs than bank lenders.