Correia, M. d. R. (2008) The choice of maturity and additional covenants in debt contracts: A panel data approach. Research in International Business and Finance. 22(3), pp. 284-300. 0275-5319.
- Information
Information
Abstract:
This paper provides a comprehensive analysis for the choice of contract terms in UK Eurobonds. Typically, the theory associates the choice of debt contract terms to firm and market characteristics, arguing that an adequate choice of these terms allows for the reduction of debt contracting costs. We use a panel data approach to examine the validity of extant predictions concerning the choice of maturity, call options, convertible options and protective covenants. Findings provide support to the agency prediction that debt contract terms function as alternative control mechanisms. Additionally, complementary role is found for the use of convertible and call options. Evidence that managers follow a maturity-matching rule, favour capital structure’s flexibility in high growth scenarios and use protective covenants when firm’s credibility is low corroborates further agency predictions.
Uncontrolled Keywords:
debt contract design, Eurobonds, panel data estimation
Subjects:
Creators:
Correia, M. d. R.
Publisher:
Elsevier
Faculties, Divisions and Institutes:
Date:
14 September 2008
Date Type:
Publication
Page Range:
pp. 284-300
Journal or Publication Title:
Research in International Business and Finance
Volume:
22
Number:
3
Language:
English
ISSN:
0275-5319
Status:
Published / Disseminated
Refereed:
Yes
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