The aim of this paper is to understand why firms choose to finance their fixed asset investments by informal credit. We examine the both country and firm level determinants of this choice in a cross-country setting. Data on informal credit use of firms is extracted from the Business Environment...

A covenant is a special set of clauses in a firm's debt contract restricting business policy and allowing creditors to take specified action should the covenant terms be violated. Three main reasons for the inclusion of covenants in debt contracts are accounted for in the literature: they (1)...