Internet Appendix: Anatomy of Corporate Borrowing Constraints
نویسندگان
چکیده
As mentioned in Section 2.1.2, other types of financial covenants have two main forms. One type specifies an upper bound on book leverage, or analogously a lower bound on book equity (book net worth). As book equity is closely related to the accumulation of past earnings, this can be broadly viewed as a variant of EBCs. The popularity of this type of covenant has declined in the past twenty years for several reasons. Demerjian (2011) postulates the decline is affected by shifts in accounting standards that gave firms more discretion in estimating the value of assets and liabilities on their balance sheets. In addition, institutional investors became increasingly more important in corporate loans, who place less emphasis on balance sheet-based metrics relative to earnings-based metrics. Currently the prevalence of the book leverage/net worth covenants is less than a third of the prevalence of earnings-based covenants, and violations are uncommon. The other type of financial covenant focuses on liquidity conditions, and specifies limits on the ratio of current assets to current liabilities. The prevalence of this type of financial covenant is relatively low. Figure IA1 plots the fraction of large firms with earnings-based covenants, book leverage/net worth covenants, and liquidity covenants, based on covenant information from DealScan loans.
منابع مشابه
Anatomy of Corporate Borrowing Constraints∗
A common perspective in macro-finance analyses links firms’ borrowing constraints to the liquidation value of physical assets firms pledge as collateral. We empirically investigate borrowing by non-financial firms in the US. We find that 20% of corporate debt by value is collateralized by specific physical assets (“asset-based lending” in creditor parlance), while 80% is based predominantly on ...
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