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The Bondholder-Stockholder Conflict: The Relation between Debt Covenants and Bond Spreads

Prior research on covenants show that they are frequently included in corporate debt agreements as means of mitigating bondholder-stockholder conflicts. As covenants should be more frequently included when there is a higher degree of bondholder-stockholder conflict, what is then the relation between covenants and spread? Our results show that on the Norwegian corporate debt market, bonds that include covenants have a higher spread than those that do not. The results of an OLS-regression using some of the most common covenants, Z’-score and bond spread shows that the 43 % of bond spread can be explained by whether the bond includes dividend restrictions, equity restrictions and poison puts, and the Z’-score of the issuer.

Identiferoai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-176496
Date January 2012
CreatorsStolt, Martin, Högnelid, Tim
PublisherUppsala universitet, Företagsekonomiska institutionen, Uppsala universitet, Företagsekonomiska institutionen
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, info:eu-repo/semantics/bachelorThesis, text
Formatapplication/pdf
Rightsinfo:eu-repo/semantics/openAccess

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