Synapse
⌘+K
Synapse
PulseExploreClubsResearchersJournals
Instagram
HomeClubsExplore
March 18, 2026The Accounting Review

Costs of Technical Violation of Accounting-Based Debt Covenants.

View Full Paper
Ask AI
Bookmark
Share

Authors

MBMessod D. BeneishIndiana UniversityEPEric PressAmerican Accounting Association

Discussion

Loading...

Member takes

Overview

Investigates costs of violating accounting-based covenants in debt agreements, indicating significant financial implications for companies.

Key Points

  • The aim is to document the costs firms incur when they technically violate accounting-based covenants in debt agreements.
  • Sample included 91 firms with accounting covenant violations from 1983 to 1987.
  • Examined changes in debt agreement terms and investment/financing decisions post-violation.
  • Analyzed refinancing and restructuring costs associated with these violations.
  • Increased interest costs range from 0.84 to 1.63 percent of equity market value.
  • Restructuring costs average 0.37 percent of equity market value.
  • Half of the firms refinanced or divested assets within a year of violation.

Cite This Study

Beneish et al. (1993) studied this question.

synapsesocial.com/papers/69ba422e4e9516ffd37a222chttps://doi.org/10.2308/tar-9605305930
View Full Paper
Ask AI
Bookmark
Share

Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1Borrower and Lender Perceptions of Accounting Information in Corporate Lending Agreements.1995
  2. 2The Role of Debt Covenants in Assessing the Economic Consequences of Limiting Capitalization of Exploration Costs.1989
  3. 3Corporate noncompliance: Do corporate violations affect bank loan contracting?2024 · 4 citations
  4. 4Do Firms Withhold Loan Covenant Details?2024 · 4 citations
  5. 5Stock Market Effects of the Closeness to Debt Covenant Restrictions Resulting from Capitalization of Leases.1993