Is it the Law or the Lawyers? Investment Covenants Around the World

Posted: 26 Oct 2005 Last revised: 10 Sep 2008

Sofia Johan

York University - Schulich School of Business; Tilburg Law and Economics Center (TILEC)

Douglas J. Cumming

York University - Schulich School of Business

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Abstract

This paper introduces a new dataset from 50 private investment funds from 17 countries around the world. We analyse the frequency of use of investment covenants imposed by institutional investors governing the activities of private investment fund managers in areas pertaining to investment decisions, investment powers, types of investments, fund operations, and limitations on liability. While the data indicate a role for country legality in affecting the frequency of use of fund covenants, the data further indicate that the presence of legally trained managers has a more pronounced role in affecting the use of covenants.

Keywords: Empirical Contracts, Private Equity, Law and Finance

JEL Classification: G24, G28, G31, G32, G35

Suggested Citation

Johan, Sofia and Cumming, Douglas J., Is it the Law or the Lawyers? Investment Covenants Around the World. European Financial Management, Vol, 12, pp. 553-574, 2006. Available at SSRN: https://ssrn.com/abstract=825064

Sofia A. Johan (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Douglas J. Cumming

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://booksite.elsevier.com/9780124095373/

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