Bird, A, Ertan, A, Ruchti, T G and Karolyi, S A (2023) Lender forbearance. Journal of Financial and Quantitative Analysis, 57 (1). pp. 207-239. ISSN 0022-1090
Abstract
We use a threshold-based design to study ex post discretion in lenders’ contractual enforcement of covenant violations. At preset thresholds, lenders enforce contractual breaches only infrequently, but this enforcement is associated with material consequences, e.g., fees and renegotiations. Enforcement varies significantly over time and peaks when credit conditions are tightest, indicating that enforcement is procyclical. Costly coordination reduces enforcement: syndicates with ex ante restrictive voting requirements enforce at lower rates. Consistent with theories of lender competition and implicit contracting, enforcement rates are lower for borrowers with access to alternative sources of financing and well-reputed lead arrangers.
More Details
Item Type: | Article |
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Subject Areas: | Accounting |
Additional Information: |
© 2020 The Authors. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington. |
Date Deposited: | 04 Nov 2020 18:38 |
Date of first compliant deposit: | 04 Nov 2020 |
Subjects: |
Credit management Contracts and torts |
Last Modified: | 31 Oct 2024 01:48 |
URI: | https://lbsresearch.london.edu/id/eprint/1536 |