Transitory and Permanent Cash Flow Shocks in Debt Contract Design
研究了贷款人如何针对借款人面临的暂时性和永久性现金流冲击设计合同，发现暂时性冲击与较少的流动性契约相关，而永久性冲击则相反，表明两者对债务契约设计有显著相反的影响。
Abstract We examine how lenders design contracts to account for transitory and permanent cash flow shocks facing borrowers. We find that volatile transitory cash flow shocks are associated with fewer liquidity covenants, indicating financial flexibility that enables firms to survive liquidity crunches. The opposite is true for volatile permanent cash flow, suggesting that borrowers’ economic fundamentals are important credit risk factors. Subsequent analyses show that borrowers exposed to transitory (permanent) shocks face less (more) severe credit consequences following poor performance. Overall, we show that transitory and permanent cash flow shocks have significant and opposite effects on debt contract covenant design.