Utilisation and restrictiveness of covenants in Australian private debt contracts

Article

Cotter, Julie. 1998. "Utilisation and restrictiveness of covenants in Australian private debt contracts." Accounting and Finance. 38 (2), pp. 181-196. https://doi.org/10.1111/1467-629X.00009
Article Title

Utilisation and restrictiveness of covenants in Australian private debt contracts

ERA Journal ID19059
Article CategoryArticle
Authors
AuthorCotter, Julie
Journal TitleAccounting and Finance
Journal Citation38 (2), pp. 181-196
Number of Pages16
Year1998
PublisherJohn Wiley & Sons
Place of PublicationMelbourne, Australia
ISSN0810-5391
1467-629X
Digital Object Identifier (DOI)https://doi.org/10.1111/1467-629X.00009
Web Address (URL)https://onlinelibrary.wiley.com/doi/10.1111/1467-629X.00009
Abstract

This paper investigates the accounting based covenants typically contained in the private debt contracts of listed Australian firms. In particular, cross sectional determinants of variation in covenant utilisation and restrictiveness are investigated. The primary source of data presented in the paper is a questionnaire completed by senior corporate managers of banks lending to listed Australian firms. In addition, standard and actual bank loan agreements are analysed. The survey results indicate that there is considerable cross-sectional variation in the utilisation and restrictiveness of covenants included in Australian private debt contracts, with this variation being partially explained by firm size and industry membership. The covenants most likely to be included are leverage, interest coverage, current, and prior charges ratios.

Keywordsdebt covenants; restrictiveness; bank loan agreements
ANZSRC Field of Research 2020350204. Financial institutions (incl. banking)
350102. Auditing and accountability
480699. Private law and civil obligations not elsewhere classified
Public Notes

File reproduced in accordance with the copyright policy of the publisher/author.

Byline AffiliationsSchool of Accounting, Economics and Finance
Event9th Annual Australasian Finance and Banking Conference
Event Details
9th Annual Australasian Finance and Banking Conference
Event Date
1998
Event Location
Sydney, Australia
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