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...

Riskier firms use more covenants, yet effective covenants should reduce the probability of bankruptcy by restricting management's actions. We disentangle these two relations between covenant use and bankruptcy risk by considering predicted and actual covenant use. We find that predicted covenant...

Riskier firms use more covenants, yet effective covenants should reduce the probability of bankruptcy by restricting management's actions. We disentangle these two relations between covenant use and bankruptcy risk by considering predicted and actual covenant use. We find that predicted covenant...

We examine how legal creditor rights are related to debt financing and corporate investment over the business cycle. Using firm-level data from 40 countries, we find that creditor rights are associated with greater debt financing and investment during economic downturns, but creditor rights have...

We examine how country-level legal and institutional investor protection shapes contractual creditor protection. Using debt covenant information for foreign bonds issued in the U.S., we find that bonds of firms incorporated in countries with stronger creditor rights use fewer covenants. This...

We examine how country-level legal and institutional investor protection shapes contractual creditor protection. Using debt covenant information for foreign bonds issued in the U.S., we find that bonds of firms incorporated in countries with stronger creditor rights use fewer covenants. This...

We examine the impact of country-level political rights on the cost of debt for corporate bonds issued by firms incorporated in 39 countries. Similar to, but separate from, the relation for creditor rights, greater political rights are associated with lower yield spreads. A one standard...