Dyreng, Scott; Ferracuti, Elia; Hills, Robert; Kubic, … - 2022
used in the literature, introduces measurement error that grossly overestimates the frequency of covenant violations (Type … I error), but rarely underestimates it (Type II error). We show that this asymmetric measurement error, which is largely … findings that suggest lenders selectively enforce violations. Finally, we propose ways to reduce this measurement error …