Discussion of 'Borrower Private Information Covenants and Loan Contract Monitoring'

17 Pages Posted: 18 Jul 2017

See all articles by Valeri V. Nikolaev

Valeri V. Nikolaev

University of Chicago Booth School of Business

Date Written: July 18, 2017


Carrizosa and Ryan (2017) explore the use of private information covenants, which contractually oblige borrowers to provide their lenders with private information: projected or intra-quarter financial statements. The authors offer evidence that creditors acquire private information about borrowers via information covenants after a contract is in place. This in turn facilitates the creditor monitoring process, subject to a cost-benefit tradeoff. I discuss how the study fits into the literature and provide additional perspective on some of its arguments. I contend that the cost side and hence the trade-offs associated with information covenants are less clear and have yet to be established empirically. I discuss complementary information mechanisms that deserve attention and raise several research design issues. I also argue that the study can shed light on an open question in the disclosure literature.

Keywords: Monitoring, disclosure, information covenants, reporting frequency, contracting on accounting information

JEL Classification: D80, G14, G21, G30, M40

Suggested Citation

Nikolaev, Valeri V., Discussion of 'Borrower Private Information Covenants and Loan Contract Monitoring' (July 18, 2017). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3004609

Valeri V. Nikolaev (Contact Author)

University of Chicago Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/valeri.nikolaev/index.html

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