Financial Cycle and the Design of Restrictive Covenant Clauses in Bond Contracts
Chao Feng;Xueying Zhang;Haiming Liu;Shiqun Ma;
Abstract:
Based on corporate bond data issued by A-share listed companies in China, this article studies the impact of financial cycles on the design of restrictive covenant clauses in bond contracts. The study found that when the financial cycle is in a boom period, the number of restrictive covenant clauses in bond contracts is significantly reduced; when the financial cycle is in a recession period, the number of restrictive covenant clauses in bond contracts is significantly increased. Channel analysis shows that when the financial cycle is in a boom period, the financing constraints faced by companies are reduced, effectively reducing the use of restrictive clauses in corporate bonds; when the financial cycle is in a recession period, the financing constraints faced by companies are significantly increased, thus increasing the use of restrictive clauses in corporate bonds. Further heterogeneity analysis shows that the impact of financial cycles on the number of restrictive covenant clauses in bond contracts is more pronounced in non-state-owned, low-transparency and low-marketization companies.
Key Words:
Foundation: 国家自然科学基金项目“内生互动视角下的银企关系研究”(71702089);; 教育部人文社科规划项目“管理层股权激励对债券持有人利益的影响研究”(24YJA790094)的资助
Authors: Chao Feng;Xueying Zhang;Haiming Liu;Shiqun Ma;
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- Chao Feng
- Xueying Zhang
- Haiming Liu
- Shiqun Ma
- School of Finance
- Shandong University of Finance and Economics
- Chao Feng
- Xueying Zhang
- Haiming Liu
- Shiqun Ma
- School of Finance
- Shandong University of Finance and Economics