Skip to main content
alt

Please enter a keyword and click the arrow to search the site

Or explore one of the areas below

Lender forbearance

Journal

Journal of Financial and Quantitative Analysis

Subject

Accounting

Publishing details

Journal of Financial and Quantitative Analysis 2020 In Press

Authors / Editors

Bird A;Ertan A;Karolyi S A;Ruchti T G

Biographies

Aytekin Ertan

Publication Year

2020

Abstract

We use a threshold-based design to study ex post discretion in lenders’ contractual enforcement of covenant violations. At preset thresholds, lenders enforce contractual breaches only infrequently, but this enforcement is associated with material consequences, e.g., fees and renegotiations. Enforcement varies significantly over time and peaks when credit conditions are tightest, indicating that enforcement is procyclical. Costly coordination reduces enforcement: syndicates with ex ante restrictive voting requirements enforce at lower rates. Consistent with theories of lender competition and implicit contracting, enforcement rates are lower for borrowers with access to alternative sources of financing and well-reputed lead arrangers.

Available on ECCH

No


Select up to 4 programmes to compare

Select one more to compare
×
subscribe_image_desktop 5949B9BFE33243D782D1C7A17E3345D0

Sign up to receive our latest news and business thinking direct to your inbox

×

Sign up to receive our latest course information and business thinking

Leave your details above if you would like to receive emails containing the latest thought leadership, invitations to events and news about courses that could enhance your career. If you would prefer not to receive our emails, you can still access the case study by clicking the button below. You can opt-out of receiving our emails at any time by visiting: https://london.edu/my-profile-preferences or by unsubscribing through the link provided in our emails. View our Privacy Policy for more information on your rights.