FINANCIAL COVENANTS IN THE MARKETS FOR PUBLIC AND PRIVATE DEBT

Two of the most influential and frequently cited accounting research papers published in Australia are the surveys by Whittred & Zimmer (1986) and Stokes & Tay (1988) of public debt contracts (hereinafter W&Z (1986) and S&T (1988)). The debt instruments surveyed in those papers were issued between1962 and1985 and there has been significant macroeconomic, institutional…

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Corporate Capital Structure:The Control Roles of Bank and Public Debt with Taxes and Costly Bankruptcy

Corporate finance theory studies the way that firms choose to raise funds.Traditionally, this theory focused on the effect of capital structure onincome tax payments and exogenously specified administrative costsof bankruptcy. More recently, this theory has emphasized the effect of capitalstructure on the control of subsequent investment decisions of the firm, insettings where managers’ and investors’…

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The 90% Public Debt Threshold: The Rise & Fall of a Stylised Fact

This paper analyses the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), on the basis of descriptive statistics and formal econometric testing. First, based on the public debt thresholds (30%, 60% and 90%) proposed by Reinhart and Rogoff (2010), descriptive statistics reveal that real GDP growth slows considerably as the central government debt-to-GDP…

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