Regulatory monitoring as a substitute for debt covenants
Both debt covenants and federal monitoring restrict banks’ discretion. We examine whether banks substituted monitoring for covenants by investigating debt issues of 105 banks between 1979 and 1984, a period when monitoring increased. We hypothesize that bank shareholders take advantage of the inters...
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| Veröffentlicht in: | Journal of accounting & economics 2004-09, Vol.37 (3), p.367-391 |
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| container_end_page | 391 |
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| container_issue | 3 |
| container_start_page | 367 |
| container_title | Journal of accounting & economics |
| container_volume | 37 |
| creator | Black, Ervin L. Carnes, Thomas A. Mosebach, Michael Moyer, Susan E. |
| description | Both debt covenants and federal monitoring restrict banks’ discretion. We examine whether banks substituted monitoring for covenants by investigating debt issues of 105 banks between 1979 and 1984, a period when monitoring increased. We hypothesize that bank shareholders take advantage of the intersection between debt covenants and regulatory monitoring to reduce agency costs. We find a decrease in the number of debt issues containing such covenants and the total debt subject to such covenants. We find no such decrease during the same period for a sample of non-banking firms, or for banks during a subsequent period. |
| doi_str_mv | 10.1016/j.jacceco.2004.01.001 |
| format | Article |
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| identifier | ISSN: 0165-4101 |
| ispartof | Journal of accounting & economics, 2004-09, Vol.37 (3), p.367-391 |
| issn | 0165-4101 1879-1980 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_37987540 |
| source | RePEc; Elsevier ScienceDirect Journals |
| subjects | Accounting Banks Debt Debt covenants Monitoring Regulation Substitution |
| title | Regulatory monitoring as a substitute for debt covenants |
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