This paper highlights the relation of two independent streams of the literature, the literature on bond covenants and literature on credit rating inflation and addresses how bond covenants are used to inflate bond ratings to comply with regulation on market access. Agency cost theory predicts...

Traditional investment behavior is commonly based on the "rational man" hypothesis and efficient market hypothesis. However, the actual market environment is not entirely in line with these theories, as investors are not always fully rational. While research on investor sentiment has mainly...