Debt covenants and analysts’ information environment

Chien-Ju Lu and Chao-Jung Chen

Asia-Pacific Journal of Accounting & Economics, 2019, vol. 26, issue 1-2, 17-37

Abstract: This study investigates whether private information from financial covenants in syndicated loans affects analysts’ information environment. Specifically, we examine the relationship between the number of financial covenants and common information in analysts’ forecasts, defined as the common-to-total information ratio. We demonstrate that the common information in analysts’ forecasts increases significantly after loan initiation when loans impose more financial covenants. We also find that the effect is more pronounced for balance sheet-based covenants relative to income statement-based covenants. Our evidence suggests that analysts use financial covenant information in loan contracts to shape their forecast behavior.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/16081625.2019.1545894 (text/html)
Access to full text is restricted to subscribers.

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:taf:raaexx:v:26:y:2019:i:1-2:p:17-37

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/raae20

DOI: 10.1080/16081625.2019.1545894

Access Statistics for this article

Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

More articles in Asia-Pacific Journal of Accounting & Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().