Discuss the effects of debt covenants in various corporate finance outcomes by providing theoretical and empirical evidence to support your case.

Debt Covenant Policies and Corporate Governance

1) Analyse the role and theoretical rationale for the introduction of covenants in debt contracting as it is related to corporate governance issues.

2) Discuss the effects of debt covenants in various corporate finance outcomes by providing theoretical and empirical evidence to support your case.

Suggested References

Chava, Sudheer, and Michael R. Roberts, 2008, How does financing impact investment? The role of debt covenants, Journal of Finance 63, 2085-2121.

DeFond, Mark L., and James Jiambalvo, 1994, Debt covenant violation and manipulation of accruals, Journal of Accounting and Economics 17, 145-176.

Denis, David J, and Jing Wang, 2014, Debt covenant renegotiations and creditor control rights, Journal of Financial Economics 113, 348-367.

Li, Ningzhong, Yun Lou, and Florin P Vasvari, 2015, Default clauses in debt contracts, Review of Accounting Studies 20, 1596-1637.

Nini, Greg, David C. Smith, and Amir Sufi, 2009, Creditor control rights and firm investment policy, Journal of Financial Economics 92, 400-420.

Nini, Greg, David C. Smith, and Amir Sufi, 2012, Creditor control rights, corporate governance, and firm value, Review of Financial Studies 25, 1713-1761.

Smith Jr, Clifford W., and Jerold B. Warner, 1979, On financial contracting: An analysis of bond covenants, Journal of Financial Economics 7, 117-161.

Sweeney, Amy Patricia, 1994, Debt-covenant violations and managers’ accounting responses, Journal of Accounting and Economics 17, 281-308.

Tan, Liang, 2013, Creditor control rights, state of nature verification, and financial reporting conservatism, Journal of Accounting and Economics 55, 1-22.

Triantis, George G, and Ronald J Daniels, 1995, The role of debt in interactive corporate governance, California Law Review 1073-1113.

Vashishtha, Rahul, 2014, The role of bank monitoring in borrowers ׳ discretionary disclosure:

Evidence from covenant violations, Journal of Accounting and Economics 57, 176-195.

Whitehead, Charles K, 2009, The evolution of debt: Covenants, the credit market, and corporate governance, The Journal of Corporation Law 34, 641

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