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SUMMARY:How Effectively Can Debt Covenants Alleviate Financial Agency Prob
 lems?
DTSTART:20141114T103000
DTEND:20141114T120000
DTSTAMP:20260510T135130Z
UID:5b3f67b03ec8e74690760d8801890dc5f7e37c57ab40b1810c23145f
CATEGORIES:Conferences - Seminars
DESCRIPTION:Andrea GAMBA (University of Warwick)\nWe examine the effective
 ness of debt covenants in alleviating financial agency problems. Distortio
 ns in both investment and financing policies with long-term debt are captu
 red in a structural dynamic model where both policies are endogenously det
 ermined by shareholders. The combined and compounding effect of these dist
 ortions is shown to be large. We impose covenants that restrict the level 
 of debt\, or control the use of proceeds from asset sales or debt issuance
 \, and analyze how\, and how much\, they mitigate financial agency costs. 
 We investigate the direct and indirect impact of covenants on financing an
 d investment policies\, including at the point where covenants are violate
 d\, providing alternative interpretations of recent empirical evidence. We
  conclude that the presence and enforcement of debt covenants significantl
 y alters dynamic financing and investment policies\, not only at the point
  of covenant violations\, and thus should be an important element of  str
 uctural models.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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