Are all covenants equally effective at reducing the bondholder-shareholder conflict? Examining the most frequently used bond covenants, we document that four out of 24 restrictions are associated with significantly higher bankruptcy risk. The use of these Default Indicating covenants can be...

This paper shows that bond market liquidity plays an important role in determining corporate debt contracts. We find that bonds with better expected market liquidity are issued with fewer restrictive covenants, longer maturities, and lower offering yield spreads. These results are robust to a...

We study how the heterogeneity between the CEO and independent board directors as a group stemming from cultural diversity affects debt pricing in bad times. Using a novel approach to identify directors’ cultural backgrounds based on their ancestral origins, we find that greater...