The effect of liquidity and solvency risk on the inclusion of bond covenants

Journal of Banking and Finance

Volumn 48, Issue , 2014, Pages 120-136

  Cook, Douglas O ^a   Fu, Xudong ^b   Tang, Tian ^c  

^a UNIVERSITY OF ALABAMA   (United States)

^b SOUTHERN ILLINOIS UNIVERSITY EDWARDSVILLE   (United States)

^c UNIVERSITY OF LOUISVILLE   (United States)

Author keywords

Bond covenants; Financial distress; G30; G32; G34; Liquidity risk; Solvency risk

Indexed keywords

EID: 84908614378     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2014.07.004     Document Type: Article

References (31)

1. Altman E. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 1968, 23:598-608.
2. Altman, E., 2000. Predicting financial distress of companies: Revisiting the Z score and Zeta model, available at . http://www.pagees.stern.nyu.edu/~ealtman/.
3. Asquith P., Wizman T. Event risk, covenants, and bondholder returns in leveraged buyouts. Journal of Financial Economics 1990, 27:195-213.
4. Bebchuk L., Cohen A. Firms' decisions where to incorporate. Journal of Law and Economics 2003, 46:383-425.
5. Begley, J., 1994. Restrictive covenants included in public debt agreements: An empirical investigation. Working paper, University of British Columbia.
6. Belsley D., Kuh E., Welsch R. Regression Diagnostics in Identifying Influential Data and Sources of Collinearity (Wiley series in probability and statistics) 1980, John Wiley & Sons, Inc.
7. Billett M.T., King T.H., Mauer D.C. Growth opportunities and the choice of leverage, debt maturity, and covenants. Journal of Finance 2007, 62:697-730.
8. Bodie Z., Taggart R. Future investment opportunities and the value of the call provision on a bond. Journal of Finance 1978, 33:1187-1200.
9. Bryan S., Nash R., Patel A. Can the agency costs of debt and equity explain the changes in executive compensation during the 1990s?. Journal of Corporate Finance 2006, 12:516-535.
10. Chava S., Kumar P., Warga A. Managerial agency and bond covenants. Review of Financial Studies 2010, 23:1120-1148.
11. Cook D., Easterwood J. Poison put bonds: an analysis of their economic role. Journal of Finance 1994, 49:1905-1920.
12. Emery G., Lyons R. The lambda index: beyond the current ratio. Business Credit 1991, 93:22-23.
13. Galai D., Masulis R. The option pricing model and the risk factor of stock. Journal of Financial Economics 1976, 5:53-81.
14. Gryglewicz S. A theory of corporate financial decisions with liquidity and solvency concerns. Journal of Financial Economics 2011, 99:365-384.
15. Hadlock C., Pierce J. New evidence on measuring financial constraints: moving beyond the KZ index. Review of Financial Studies 2010, 23:1909-1940.
16. James C. Some evidence on the uniqueness of bank loans. Journal of Financial Economics 1987, 19:217-235.
17. Jensen M.C., Meckling W. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 1976, 3:305-360.
18. John T., John K. Top management compensation and capital structure. Journal of Finance 1993, 48:949-974.
19. Kacperczyk M., Schnabl P. When safe proved risky: commercial paper during the financial crisis of 2007-2009. Journal of Economic Perspectives 2010, 24:29-50.
20. Lummer S., McConnell J. Further evidence on the bank lending process and the capital-market response to bank loan agreements. Journal of Financial Economics 1989, 25:99-122.
21. Malitz I. On financial contracting: the determinants of bond covenants. Financial Management 1986, 15:18-25.
22. Mansi, S., Qi, Y., Wald, J.K., 2011. Debt covenants, bankruptcy risk, and issuance costs. SSRN eLibrary, . http://ssrn.com/paper=1786709.
23. Myers S.C. Determinants of corporate borrowing. Journal of Financial Economics 1977, 5:147-175.
24. Nash R.C., Netter J.M., Poulsen A.B. Determinants of contractual relations between shareholders and bondholders: investment opportunities and restrictive covenants. Journal of Corporate Finance 2003, 9:201-232.
25. Norton E., Wang H., Ai C. Computing interaction effects and standard errors in logit and probit models. Stata Journal 2004, 4:154-167.
26. Poulsen A., Lehn K. The economics of event risk: the case of bondholders in takeovers. Journal of Corporation Law 1990, 15:199-218.
27. Qi Y., Wald J. State laws and debt covenants. Journal of Law and Economics 2008, 51:179-207.
28. Senbet L., Wang T. Corporate financial distress and bankruptcy: a survey. Foundations and Trends in Finance 2012, 5:243-335.
29. Smith C.W., Warner J.B. On financial contracting: an analysis of bond covenants. Journal of Financial Economics 1979, 7:117-161.
30. Stark J., Rahl A., Seegers L. Marriot risk: a new model covenant to restrict transfers of wealth from bondholders to stockholders. Columbia Law Review 1994, 503-588.
31. Stoh M., Mauer D. The determinants of debt maturity. Journal of Business 1996, 69:279-3122.