Purpose: The purpose of this paper is to identify the impact of governance structures in defining the relationship between profits and leverage. Design/methodology/approach: The paper uses the standard design used by Fama and French (2002) and employs it under different governance structures....

This article empirically shows that the cost of new debt is higher for firms that commit covenant violations. Using a proxy for product market competition to capture exogenous changes to a firm's competitive environment, I find that the cost is systematically higher for firms that operate in...

This paper examines earnings management activities around debt covenant violations. We focus on accruals management and real activities manipulation behavior of managers in the quarters around the covenant violation. We expect covenant restrictions to influence these activities in the quarters...