The Role of Bond Covenants and Short-Term Debt: Evidence from Brazil
Journal Title: BAR: Brazilian Administration Review - Year 2013, Vol 10, Issue 3
Abstract
This paper examines the role of financial covenants as substitutes for short-term debt and a possible trade off between short-term debt and long-term debt, especially for companies with growth opportunities. Using a sample of 159 corporate bonds issued on the Brazilian Market, we found evidence that: first, financial covenants and short-term debt are substitute tools to minimize agency conflict, as per literature confirming that stronger financial covenants could limit the possible expropriation of debt holders and in exchange debt holders may be willing to lend at longer terms and; second, companies with growth opportunities are willing to exchange shortterm debt for long-term debt under the presence of covenants. Most importantly, this does not seem to be a restriction for financing growth opportunities.
Authors and Affiliations
Silva, Vinícius Augusto Brunassi; Saito, Richard; Barbi, Fernando Carvalhaes
Keywords
Related Articles
- EP ID EP40551
- DOI -
- Views 240
- Downloads 0
Thresholds are everywhere: A systems approach to public policy
The analysis of public policies often fails to account for effects beyond mere cost-benefit analysis. Incorporating elements from the literature on system dynamics, complexity and legitimacy, the present paper develops a...
The Motivation to Participate in Citizen-Sourcing and Hackathons in the Public Sector
Key challenges of how citizens can be motivated to participate in citizen-sourcing initiatives remain unaddressed. In this paper, we identified the influence of eight motivation variables in the number of participations...
Operational Practices and Financial Performance: an Empirical Analysis of Brazilian Manufacturing Companies
In the operations management field, operational practices like total quality management or just in time have been seen as a way to improve operational performance and ultimately financial performance. Empirical support...
Work in Multidisciplinary Teams: a Study about Mobilization of Knowledge and Learning in an Organization of Complex Products
This article, the result of a Master’s thesis, has as the main objective to investigate how trainee-engineers from the Advanced Training Program for Engineers (ATPE), from a Brazilian organization called Challenge, work...
e-Qualifácil: Preparing Small Businesses for a Quality Management System
More than 95 percent of all the businesses around the globe are small- and medium-sized (International Organization for Standardization [ISO], 2016). However, the limited resources of small businesses represent a difficu...