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Gietzmann, M., Isidro, H. & Raonic, I. (2023). The rise of covenant-lite bond contracting. Journal of Accounting, Auditing and Finance. 38 (3), 483-509

M. Gietzmann et al.,  "The rise of covenant-lite bond contracting", in Journal of Accounting, Auditing and Finance, vol. 38, no. 3, pp. 483-509, 2023

@article{gietzmann2023_1714118553506,
	author = "Gietzmann, M. and Isidro, H. and Raonic, I.",
	title = "The rise of covenant-lite bond contracting",
	journal = "Journal of Accounting, Auditing and Finance",
	year = "2023",
	volume = "38",
	number = "3",
	doi = "10.1177/0148558X20987384",
	pages = "483-509",
	url = "https://journals.sagepub.com/doi/abs/10.1177/0148558X20987384"
}

TY  - JOUR
TI  - The rise of covenant-lite bond contracting
T2  - Journal of Accounting, Auditing and Finance
VL  - 38
IS  - 3
AU  - Gietzmann, M.
AU  - Isidro, H.
AU  - Raonic, I.
PY  - 2023
SP  - 483-509
SN  - 0148-558X
DO  - 10.1177/0148558X20987384
UR  - https://journals.sagepub.com/doi/abs/10.1177/0148558X20987384
AB  - We investigate the trading and yield effects of covenant-lite (cov-lite) high-yield bond contracts, which have a restricted (lite) set of covenants. The excluded covenants often are those that use accounting performance measures. Although much research has focused on the potential benefits of accounting as a basis for debt contracting, little is known about settings where it may be optimal to exclude accounting performance statistics from public debt contracts. We find that cov-lite high-yield bonds have a higher trading turnover and lower yield spreads. Our findings provide empirical support for theory, which predicts, for optimal bond covenant design, that a trade-off between improving trading ease versus enhanced investor protection needs to be managed. These results enhance our understanding of the limits of accounting’s role in (bond) contracting design.
ER  -