Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Business
Loan Purpose And Accounting Based Debt Covenants, Daniel Gyung Paik, Timothy L. Hamilton, Brandon Byunghwan Lee, Sung Wook Yoon
Loan Purpose And Accounting Based Debt Covenants, Daniel Gyung Paik, Timothy L. Hamilton, Brandon Byunghwan Lee, Sung Wook Yoon
Accounting Faculty Publications
Purpose
The purpose of this paper is to investigate the association between the purpose of a loan and the type of debt covenants, separated into balance sheet-based and income statement-based covenants.
Design/methodology/approach
Using private loan deal observations obtained from the DealScan database over the period between 1996 and 2013, the authors classify the sample loan deals into three categories based on the purpose of borrowing, namely, borrowings for corporate daily operating purposes, financing purposes and acquisition and investing purposes. The authors conduct multinomial logistic regression analysis to test the relationship between the choice of financial ratios in a debt covenant …