The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
Bond Covenants and Delegated Monitoring
Abstract
This paper examines alternative contracting arrangements available to a firm seeking to finance an investment project. The authors consider the choice between loan contracts with covenants based on noisy indicators of the firm's financial health and loan contracts enforced by a monitoring specialist. In one interpretation, the specialist is a financial intermediary. The firm's choice is shown to depend upon the firm's credit rating, the accuracy of financial indicators of the firm's condition, the loss from premature liquidation of the firm's project, and the cost of monitoring.
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In the citing paper
“The debt contracts issued by commercial banks, ®nance companies, and other ®nancial institutions are often covenant-rich, requiring the borrower to return to the institution to renegotiate these covenants when strategic opportunities to enhance value arise or when the ®nancial condition of the ®rm changes (Berlin and Loeys, 1988;Carey et al., 1993).”
From The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle (1998) · cites this paper as Berlin and Loeys, 1988
Citations
Cites
Financial intermediation and delegated monitoring
Diamond, D. W. (1984) · The Review of Economic Studies · doi:10.2307/2297430 · Cited by 8,476
Research works printed but not linked: 12
- Berlin M., 1986, “The Choice between Bonds and Bank Loans.”
- Blackwell F., 1951, Proceedings of the Second Berkeley Symposium in Mathematical Statistics and Probability, 93
- 10.1016/0022-0531(86)90115-8 · DOI · Paper page
- Campbell T., 1980, Information Production, Market Signalling, and the Theory of Financial Intermediation, Journal of Financ, 35, 863, 10.2307/2327206 · DOI
- 10.1111/j.1540-6261.1983.tb03840.x · DOI
- Gorton G. B., 1986, “Bank Deregulation, Credit Markets, and the Control of Capital.”
- 10.1016/0304-405X(82)90017-4 · DOI
- 10.1016/0304-405X(82)90014-9 · DOI
- 10.2307/3003562 · DOI · Paper page
- 10.2307/2297431 · DOI
- Morris Robert, 1983, Incentive Compensation Systems for Commercial Loan Officers
- 10.1016/0304-405X(79)90011-4 · DOI
Cited by
Sorted by citations
N. Berger, A., & F. Udell, G. (1998) · Journal of Banking & Finance · doi:10.1016/s0378-4266(98)00038-7 · Cited by 3,690
“…companies, and other financial institutions are often covenant-rich, requiring the borrower to return to the institution to renegotiate these covenants when strategic opportunities to enhance value arise or when the financial condition of the firm changes (Berlin and Loeys 1988, Carey et al. 1993).”
Metadata
- Authors
- BERLIN, M., & LOEYS, J.
- Affiliations
- Federal Reserve (US)
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1988-06
- Volume
- 43
- Issue
- 2
- Pages
- 397-412
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2090920573
- Cited by
- 436
- References
- 1
- Citations by year
- 2026: 6 · 2025: 15 · 2024: 16 · 2023: 15 · 2022: 16 · 2021: 26 · 2020: 11 · 2019: 25 · 2018: 12 · 2017: 15 · 2016: 23 · 2015: 14 · 2014: 17 · 2013: 22 · 2012: 15
- FWCI
- 6.56
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Journal of Finance (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
- Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
- Social Sciences › Law › Corporate Insolvency and Governance
- Keywords
- bond covenants, delegated monitoring, loan agreement, financial intermediaries, credit ratings, project liquidation, monitoring costs, investment financing, contractual arrangements
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