How lender-specific factors affect their covenant negotiation strategies

This study builds upon the debt covenant and banking literature to explore the empirical relationship between bank characteristics and debt covenants. With the use of different covenant restrictiveness proxies, in addition to different model specifications, the study that bank size, credit risk, liquidity, income diversification, deposit funding, and the bank's financial stability all have significant explanatory power on covenant restrictiveness, although the significance of these variables differs depending upon the restrictiveness proxy, the sample, and the empirical methodology. Another interesting finding from this study is significance of lender and time fixed effects, which suggests that market conditions and exogenous factors have an influence over financial contracting arrangements. Overall, the study offers a new insight into determinants of covenant agreements, has implications for policymaking, and contributes to two distinct areas of financial research.

Name dc:type.qualificationname

mres

Level dc:type.qualificationlevel

masters-pg

Grantor dc:publisher.institution

University of Strathclyde

Year dc:date.issued

2015

Author dc:creator

• Crichton, Calum

DOI

10.48730/xcs8-yj86

Identifier

T14193

Author Identifier

201351565

OAI identifier oai:identifier

oai:strathclyde:0p0966902