Séminaire
Debt Dispersion, Creditor Conflicts, and Covenants in Corporate Loans
Clemens Otto (HEC Paris)
Fédération des Banques Françaises Seminar
TSE, 23 mars 2015, 12h30–14h00, salle MF 323
Référence
Clemens Otto (HEC Paris), « Debt Dispersion, Creditor Conflicts, and Covenants in Corporate Loans », Fédération des Banques Françaises Seminar, TSE, 23 mars 2015, 12h30–14h00, salle MF 323.
Résumé
How do conflicts between different creditors affect debt contract terms? We study this question by examining the effect of dispersion in firms' existing debt structures on the use of covenants in new corporate loans. We find that more covenants are included when firms' existing debt is more dispersed. This effect is strongest for firms with high default risk and opaque accounting. Our findings suggests that covenants are not only used to address creditor-shareholder conflicts but also conflicts between creditors. Further, our results indicate a dynamic component missing from static debt structure models: Dispersion today entails constraints when issuing future debt.
Partenaire de recherche
Fédération des Banques Françaises Research Initiative (sustainable)