Essays on Financial Contracting

Simple item page
dc.contributor.advisorKumar, Praveen
dc.contributor.committeeMemberYerramilli, Vijay
dc.contributor.committeeMemberDoshi, Hitesh
dc.contributor.committeeMemberYae, James
dc.contributor.committeeMemberLarson, Chad R.
dc.creatorDocgne Penlap, Sandrine
dc.date.accessioned2019-09-14T21:16:44Z
dc.date.available2019-09-14T21:16:44Z
dc.date.createdMay 2019
dc.date.issued2019-05
dc.date.submittedMay 2019
dc.date.updated2019-09-14T21:16:44Z
dc.description.abstractThis dissertation consists of two essays on financial contracting. In the first essay, I provide evidence that covenants in bond indentures affect firms' investment policy outside of covenant violations. Using a large dataset of public bonds, and controlling for the self-selectivity of covenant inclusion, I find that bonds with investment (financing) restrictions are associated with a decrease (increase) in investment in the two years following the issue. The effect of investment restrictions is entirely driven by firms that are more financially constrained. Both financially constrained and unconstrained firms have significantly higher investment spending after issuing a bond with financing restrictions, although the magnitude of the effect is higher in the latter group. These findings suggest that while bond covenants can help mitigate agency problems and reduce the cost of debt, they may also have externalities that lead to more investment distortions in firms that are closer to financial distress. This paper is the first to document a positive relationship between a covenant restriction and ex-post investment. In the second essay, I use a forward-looking and exogenous measure of price uncertainty to examine the causative effect of uncertainty on the choice and use of financial covenants in private and public debt contracts, as well as the role that risk management and financial frictions play in that relationship. In private loans, high uncertainty leads to more and tighter financial covenants linked to performance. Risk management attenuates the effect of uncertainty on the inclusion of financial covenants while firms characteristics especially related to default risk intensify the effect. In bond contracts, uncertainty decreases the use of financial covenants for firms that have financial covenants in an existing private loan at the time the bond is issued. These results are consistent with the theory that financial covenants help lenders economize on monitoring costs and suggest that bondholders economize on monitoring costs by free-riding on the monitoring efforts of private lenders.
dc.description.departmentFinance, Department of
dc.format.digitalOriginborn digital
dc.format.mimetypeapplication/pdf
dc.identifier.urihttps://hdl.handle.net/10657/4631
dc.language.isoeng
dc.rightsThe author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s).
dc.subjectAgency conflicts
dc.subjectBond covenants
dc.subjectInvestment
dc.subjectCapital expenditures
dc.subjectFinancial contracts
dc.subjectControl rights
dc.subjectMonitoring
dc.subjectDebt covenants
dc.subjectUncertainty
dc.titleEssays on Financial Contracting
dc.type.dcmiText
dc.type.genreThesis
thesis.degree.collegeC. T. Bauer College of Business
thesis.degree.departmentFinance, Department of
thesis.degree.disciplineBusiness Administration
thesis.degree.grantorUniversity of Houston
thesis.degree.levelDoctoral
thesis.degree.nameDoctor of Philosophy

Files

Original bundle

Now showing 1 - 1 of 1
Thumbnail Image
Name:
DOCGNEPENLAP-DISSERTATION-2019.pdf
Size:
1.69 MB
Format:
Adobe Portable Document Format
Download

License bundle

Now showing 1 - 2 of 2
No Thumbnail Available
Name:
PROQUEST_LICENSE.txt
Size:
4.44 KB
Format:
Plain Text
Description:
Download
No Thumbnail Available
Name:
LICENSE.txt
Size:
1.82 KB
Format:
Plain Text
Description:
Download

Collections

Published ETD Collection