Scope for renegotiation in private debt contracts

Valeri V. Nikolaev

Journal of Accounting and Economics, 2018, vol. 65, issue 2, 270-301

Abstract: I study whether the demand for monitoring explains the scope for renegotiation in private debt contracts. Theory suggests that renegotiation trades off the benefits of enhanced monitoring with the costs of creditor intervention. Consistent with this tradeoff, I show that monitoring demand proxies bear a positive association with renegotiation intensity. In contrast, the costs of creditor intervention are associated with less frequent renegotiations. I also find that contractual monitoring mechanisms, such as covenants and concentrated syndicate structures, are positively related to renegotiation intensity. Furthermore, renegotiations transmit new information to the market, in line with private creditors discovering information during renegotiations.

Keywords: Debt contract renegotiation; Contracting costs; Monitoring; Creditor control rights; Incomplete contracts (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 M41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165410117300770
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:65:y:2018:i:2:p:270-301

DOI: 10.1016/j.jacceco.2017.11.007

Access Statistics for this article

Journal of Accounting and Economics is currently edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts

More articles in Journal of Accounting and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().