The Screening Role of Covenant Heterogeneity
研究了债务合同中财务契约组合的差异（契约异质性）如何反映并帮助贷款人筛选借款人的事前私有信息，发现高风险借款人倾向于谈判对业绩敏感度较低的契约。
ABSTRACT We investigate whether differences in the mix of financial covenants in debt contracts (i.e., covenant heterogeneity) reflect—and provide a way for lenders to elicit, or screen—borrowers’ pre-contractual private information about their future risk profile. Consistent with adverse selection theories, we predict and find that borrowers with higher future risk negotiate loans with covenants that are less sensitive to performance, compared to borrowers with lower future risk. We differentiate between screening and incentive explanations for this finding and provide evidence that screening accounts for a substantial portion of this overall relation. Our study highlights how, in addition to shaping borrowers’ incentives through monitoring, covenant heterogeneity reflects borrowers’ future risk profiles and can help lenders screen accordingly. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G21; G32; G34.