Skip to main content

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

Corporate loan securitization and the standardization of financial covenants



Publishing details

Social Sciences Research Network

Authors / Editors

Bozanic Z;Loumioti M;Vasvari F P


Publication Year



We examine whether syndicated loans securitized through Collateralized Loan Obligations (CLOs) have more standardized financial covenants. We proxy for the standardization of covenants using the textual similarity of their contractual definitions. We find that securitized loans are associated with higher covenant standardization than non-securitized institutional loans. Additionally, we show that CLOs with more diverse or frequently rebalanced portfolios are more likely to purchase loans with standardized covenants, potentially because standardization can alleviate the high information costs in loan monitoring and screening that these CLOs face. We further document that covenant standardization is associated with greater loan and CLO note rating agreement between credit rating agencies, further supporting the relation between lower information costs and covenant standardization. Overall, our study provides evidence that loan securitization is related to the design of standardized financial covenants.


Securitization; Standardization; Collateralized Loan Obligations (CLO); Financial Covenants; Syndicated Loans


Social Sciences Research Network

Available on ECCH


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: or by unsubscribing through the link provided in our emails. View our Privacy Policy for more information on your rights.