Corporate Governance and Covenants Restrictiveness in Private Debt Contract

Both corporate governance and covenants separately have been shown to play a role in mitigating agency problems associated with debt. Accordingly, we examine the association between corporate governance and the restrictiveness of covenants on a sample of newly syndicated loans in the U.S. private de...

Full description

Bibliographic Details
Main Authors:	Abu Bakar, Intan Suryani, Mather, Paul, George, Tanewski
Format:	Monograph
Language:	English
Published:	Contemporary Accounting Research 2012
Subjects:	HF5601 Accounting. Bookkeeping HJ Public Finance
Online Access:	http://irep.iium.edu.my/27329/ http://irep.iium.edu.my/27329/1/CAR_Submission_Covenants_Paper_23Oct2012.pdf

id	iium-27329
recordtype	eprints
spelling	iium-273292012-12-21T12:15:23Z http://irep.iium.edu.my/27329/ Corporate Governance and Covenants Restrictiveness in Private Debt Contract Abu Bakar, Intan Suryani Mather, Paul George, Tanewski HF5601 Accounting. Bookkeeping HJ Public Finance Both corporate governance and covenants separately have been shown to play a role in mitigating agency problems associated with debt. Accordingly, we examine the association between corporate governance and the restrictiveness of covenants on a sample of newly syndicated loans in the U.S. private debt market. Cross-sectional results support the argument that, ceteris paribus, firms with stronger corporate governance are perceived by debtholders as less likely to engage in ex post opportunism, thereby reducing the need for particularly restrictive covenants. More specifically, the results indicate that both a corporate governance score and board independence are positively and significantly associated with covenant slack. While the results also show that independent directors’ financial expertise and covenant slack are positively related, there is no evidence to suggest that slack is associated with “busy” directors or CEO duality. Overall, the empirical evidence supports the hypothesis that debtholders perceive aspects of corporate governance to be beneficial and factor them into their contracting decisions. Contemporary Accounting Research 2012-10 Monograph NonPeerReviewed application/pdf en http://irep.iium.edu.my/27329/1/CAR_Submission_Covenants_Paper_23Oct2012.pdf Abu Bakar, Intan Suryani and Mather, Paul and George, Tanewski (2012) Corporate Governance and Covenants Restrictiveness in Private Debt Contract. Working Paper. Contemporary Accounting Research. (Unpublished)
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HF5601 Accounting. Bookkeeping HJ Public Finance
spellingShingle	HF5601 Accounting. Bookkeeping HJ Public Finance Abu Bakar, Intan Suryani Mather, Paul George, Tanewski Corporate Governance and Covenants Restrictiveness in Private Debt Contract
description	Both corporate governance and covenants separately have been shown to play a role in mitigating agency problems associated with debt. Accordingly, we examine the association between corporate governance and the restrictiveness of covenants on a sample of newly syndicated loans in the U.S. private debt market. Cross-sectional results support the argument that, ceteris paribus, firms with stronger corporate governance are perceived by debtholders as less likely to engage in ex post opportunism, thereby reducing the need for particularly restrictive covenants. More specifically, the results indicate that both a corporate governance score and board independence are positively and significantly associated with covenant slack. While the results also show that independent directors’ financial expertise and covenant slack are positively related, there is no evidence to suggest that slack is associated with “busy” directors or CEO duality. Overall, the empirical evidence supports the hypothesis that debtholders perceive aspects of corporate governance to be beneficial and factor them into their contracting decisions.
format	Monograph
author	Abu Bakar, Intan Suryani Mather, Paul George, Tanewski
author_facet	Abu Bakar, Intan Suryani Mather, Paul George, Tanewski
author_sort	Abu Bakar, Intan Suryani
title	Corporate Governance and Covenants Restrictiveness in Private Debt Contract
title_short	Corporate Governance and Covenants Restrictiveness in Private Debt Contract
title_full	Corporate Governance and Covenants Restrictiveness in Private Debt Contract
title_fullStr	Corporate Governance and Covenants Restrictiveness in Private Debt Contract
title_full_unstemmed	Corporate Governance and Covenants Restrictiveness in Private Debt Contract
title_sort	corporate governance and covenants restrictiveness in private debt contract
publisher	Contemporary Accounting Research
publishDate	2012
url	http://irep.iium.edu.my/27329/ http://irep.iium.edu.my/27329/1/CAR_Submission_Covenants_Paper_23Oct2012.pdf
first_indexed	2023-09-18T20:40:37Z
last_indexed	2023-09-18T20:40:37Z
_version_	1777409340372680704

Corporate Governance and Covenants Restrictiveness in Private Debt Contract

Similar Items