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Two Essays on Covenant-Lite Loans : = Investigations of Managerial Incentives and Dual Ownership.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Two Essays on Covenant-Lite Loans :/
Reminder of title:	Investigations of Managerial Incentives and Dual Ownership.
Author:	Yi, Boli.
Description:	1 online resource (181 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 85-02, Section: A.
Contained By:	Dissertations Abstracts International85-02A.
Subject:	Finance. -
Online resource:	click for full text (PQDT)
ISBN:	9798379945091

Two Essays on Covenant-Lite Loans : = Investigations of Managerial Incentives and Dual Ownership.
Yi, Boli.

Two Essays on Covenant-Lite Loans :Investigations of Managerial Incentives and Dual Ownership. - 1 online resource (181 pages)

Source: Dissertations Abstracts International, Volume: 85-02, Section: A.

Thesis (Ph.D.)--Kent State University, 2023.

Includes bibliographical references

In syndicated loan markets, one striking development is the exclusion of financial maintenance covenants in leveraged loans, called covenant-lite loans.The first essay of the dissertation explores managerial incentives to choose a covenant-lite loan. I find managerial opportunism incentives significantly dominate managerial flexibility incentives in borrowing covenant-lite loans, suggesting that stronger executive power base being more likely to borrower-friendly loan contracts. Furthermore, in taking this borrower-friendly loan type, lenders get compensated by setting higher loan spread and tighter loan strictness to covenant-lite loan borrowers when the loan is taken to build up flexibility in management to deal with firm-specific uncertainty (organizational discretion). Stock market is also sensitive to organizational discretion in a negative way.The second essay of the dissertation assesses whether dual ownership offers ongoing monitoring to covenant-lite loan borrowers' credit worthiness. A dual owner owns both the stock and a portion of the loan from a borrower and the enhanced monitoring hypothesis suggests these dual owners may monitor the firms in lieu of financial maintenance covenants. I find covenant-lite loan borrowers with dual ownership exhibit lower default risk and better firm performance than covenant-lite loan borrowers without dual ownership. By performing a difference-in-difference test and sub-sample regression estimates to only covenant-lite loan borrowers with dual ownership, I rule out the possibility that low default risk and strong firm performance during the presence of dual ownership is a result of "cherry-picked" investments in equities. Overall, my estimates support ongoing monitoring hypothesis, and presence of dual ownership may function as an effective monitoring mechanism regulating covenant-lite loan borrowers? creditworthiness and reducing default risk.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2024

Mode of access: World Wide Web

ISBN: 9798379945091Subjects--Topical Terms:

559073
Finance.
Subjects--Index Terms:

Loan marketsIndex Terms--Genre/Form:

554714
Electronic books.

Two Essays on Covenant-Lite Loans : = Investigations of Managerial Incentives and Dual Ownership.
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