Access the full text.
Sign up today, get DeepDyve free for 14 days.
Loading next page...
/lp/oxford-university-press/managerial-agency-and-bond-covenants-M1BEfOcN7s
References (36)
-
B. Boyd (1994)
Board control and ceo compensationStrategic Management Journal, 15
-
R. Nash, Jeffry Netter, A. Poulsen (2003)
Determinants of contractual relations between shareholders and bondholders: investment opportunities and restrictive covenantsJournal of Corporate Finance, 9
-
Michael Jensen (1986)
Agency Cost of Free Cash Flow, Corporate Finance, and TakeoversIndustrial Organization & Regulation eJournal
-
Matthew Billett, T. King, D. Mauer (2007)
Growth Opportunities and the Choice of Leverage, Debt Maturity, and CovenantsJournal of Finance, 62
-
Z. Fluck (1998)
The Dynamics of the Management-Shareholder ConflictOrganizations & Markets eJournal
-
Andrei Shleifer, Robert Vishny (1989)
Management entrenchment: The case of manager-specific investmentsJournal of Financial Economics, 25
-
S. Myers (1977)
Determinants of corporate borrowingJournal of Financial Economics, 5
-
Kevin Murphy, M. Jensen (1990)
Performance Pay and Top Management IncentivesLabor: Personnel Economics
-
Arthur Warga, I. Welch (1993)
BONDHOLDER LOSSES IN LEVERAGED BUYOUTSReview of Financial Studies, 6
-
F. Garrone, Bruno Solnik (1976)
A Global Approach to Money Management, 2
-
René Stulz (1990)
Managerial discretion and optimal financing policiesJournal of Financial Economics, 26
-
F. Black (1976)
The Dividend Puzzle, 2
-
René Stulz (1988)
Managerial control of voting rights: Financing policies and the market for corporate controlJournal of Financial Economics, 20
-
Benjamin Ayers, John Jiang, P. Yeung (2006)
Discretionary Accruals and Earnings Management: An Analysis of Pseudo Earnings TargetsAmerican Accounting Association Meetings (AAA)
-
M. Jensen (1993)
The Modern Industrial Revolution, Exit, and the Failure of Internal Control SystemsCGA: Governance & Internal Control Systems (Topic)
-
Joy Begley, R. Watts, R. Ball, Clifford Smith, Bill Schwert (2005)
Restrictive Covenants Included in Public Debt Agreements: An Empirical Investigation -
C. Cheng, D. Collins, H. Huang (2006)
Investors' Interpretations of the October 15, 2002 Standard & Poors Transparency & Disclosure RankingsSPGMI: Compustat Fundamentals (Topic)
-
Clifford Smith, Jerold Warner (1979)
On financial contracting: An analysis of bond covenantsJournal of Financial Economics, 7
-
Michael Jensen, W. Meckling (1976)
Theory of the Firm -
(1994)
Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management -
W. Gebhardt, Charles Lee, B. Swaminathan (2000)
Toward an Implied Cost of CapitalCorporate Finance and Organizations eJournal
-
S. Finkelstein, D. Hambrick (1989)
Chief executive compensation: A study of the intersection of markets and political processesSouthern Medical Journal, 10
-
Aidong Hu, Praveen Kumar (2004)
Managerial Entrenchment and Payout PolicyJournal of Financial and Quantitative Analysis, 39
-
Karl Diether, Christopher Malloy, A. Scherbina (2002)
Differences of Opinion and the Cross Section of Stock ReturnsJournal of Finance, 57
-
Joy Begley, Gerald Feltham (1999)
An empirical examination of the relation between debt contracts and management incentivesJournal of Accounting and Economics, 27
-
Ileen Malitz (1986)
On Financial Contracting: The Determinants of Bond CovenantsFinancial Management, 15
-
R. Cyert, Sok-Hyon Kang, Praveen Kumar (2002)
Corporate Governance, Takeovers, and Top-Management Compensation: Theory and EvidenceManag. Sci., 48
-
Jeffrey Zwiebel (1995)
Dynamic Capital Structure Under Managerial EntrenchmentThe American Economic Review, 86
-
J. Jones (1991)
Earnings Management During Import Relief InvestigationsJournal of Accounting Research, 29
-
S. Chava, Michael Roberts (2007)
How Does Financing Impact Investment? The Role of Debt CovenantsWharton Research Data Services (WRDS) Research Paper Series
-
R. Sundaram, D. Yermack (2005)
Pay Me Later: Inside Debt and its Role in Managerial CompensationLabor: Personnel Economics
-
E. Fama, K. French (1997)
Industry costs of equityJournal of Financial Economics, 43
-
Douglas Diamond (1991)
Monitoring and Reputation: The Choice between Bank Loans and Directly Placed DebtJournal of Political Economy, 99
-
Andrei Shleifer, Robert Vishny (1986)
Large Shareholders and Corporate ControlJournal of Political Economy, 94
-
Sanford Grossman, O. Hart (1983)
Corporate Financial Structure and Managerial Incentives -
Philip Berger, E. Ofek, D. Yermack (1995)
Managerial Entrenchment and Capital Structure DecisionsIO: Empirical Studies of Firms & Markets
- Publisher
- Oxford University Press
- Copyright
- © The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
- Subject
- Article
- ISSN
- 0893-9454
- eISSN
- 1465-7368
- DOI
- 10.1093/rfs/hhp072
- Publisher site
- See Article on Publisher Site
Abstract
Based on an analysis of the agency risk for bondholders from managerial entrenchment and fraud, we derive and test refutable hypotheses about the influence of managerial agency risk on bond covenants, using a comprehensive database of corporate bonds from the 1993–2007 period. Managerial entrenchment and the risk of managerial fraud significantly influence the use of covenants, in the direction predicted by the agency-theoretic framework. Our analysis highlights the varied effects of entrenchment on different types of agency risks faced by bondholders: Entrenched managers aggravate investment risk, but ameliorate risk from shareholder opportunism. Covenant use also responds efficiently to the quality of information available regarding the risk of managerial fraud.
Journal
The Review of Financial Studies – Oxford University Press
Published: Mar 30, 2010
Keywords: JEL Classification D82 G32 G34