The DOI matches its Crossref record; 2 of the 2 references it cites were found in a registry or an index.
Covenants and Collateral as Incentives to Monitor
Abstract
Although monitoring borrowers is thought to be a major function of financial institutions, the presence of other claimants reduces an institutional lender's incentives to do this. Thus loan contracts must be structured to enhance the lender's incentives to monitor. Covenants make a loan's effective maturity, and the ability to collateralize makes a loan's effective priority, contingent on monitoring by the lender. Thus both covenants and collateral can be motivated as contractual devices that increase a lender's incentive to monitor. These results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending.
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The choice of unsecured debt might also be used as a signal of a favorable quality assessment by the lender, again reducing the costs of other equity and debt.
“The choice of unsecured debt might also be used as a signal of a favorable quality assessment by the lender, again reducing the costs of other equity and debt (Rajan and Winton, 1995).”
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 Rajan and Winton, 1995
Citations
Cites
Financial intermediation and delegated monitoring
Diamond, D. W. (1984) · The Review of Economic Studies · doi:10.2307/2297430 · Cited by 8,476
Debt covenants and renegotiation
Berlin, M., & Mester, L. J. (1992) · Journal of Financial Intermediation · doi:10.1016/1042-9573(92)90005-x · Cited by 393
Flagged first, then by citations
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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
“The choice of unsecured debt might also be used as a signal of a favorable quality assessment by the lender, again reducing the costs of other equity and debt (Rajan and Winton 1995).”
The role of information and financial reporting in corporate governance and debt contracting
Armstrong, C. S., Guay, W. R., & Weber, J. P. (2010) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2010.10.001 · Cited by 1,494
Loan Officer Turnover and Credit Availability for Small Firms
Scott, J. A. (2006) · Journal of Small Business Management · doi:10.1111/j.1540-627x.2006.00186.x · Cited by 95
Metadata
- Authors
- RAJAN, R., & WINTON, A.
- Affiliations
- Northwestern University (US)
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1995-09
- Volume
- 50
- Issue
- 4
- Pages
- 1113-1146
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W1982438007
- Cited by
- 1,193
- References
- 2
- Citations by year
- 2026: 34 · 2025: 64 · 2024: 55 · 2023: 50 · 2022: 64 · 2021: 60 · 2020: 62 · 2019: 54 · 2018: 58 · 2017: 75 · 2016: 56 · 2015: 59 · 2014: 61 · 2013: 55 · 2012: 46
- FWCI
- 14.83
- 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 › Banking stability, regulation, efficiency
- Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Law, Economics, and Judicial Systems
- Keywords
- debt covenants, collateral, borrower monitoring, loan maturity
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