Evidence on the determinants and economic consequences of delegated monitoring
Name
Weber_Evidence on the determinants.pdf
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640.24 KB
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Adobe PDF
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4ab5390d62b9e085ba3a29d9412a8450
Author(s)
Beatty, Anne
Liao, Scott
Weber, Joseph P.
Date Issued
December 2011
Journal
Journal of Accounting and Economics
Publisher
Elsevier
Citation
Beatty, Anne, Scott Liao, and Joseph Weber. “Evidence on the Determinants and Economic Consequences of Delegated Monitoring.” Journal of Accounting and Economics 53, no. 3 (June 2012): 555–576.
Version
Author's final manuscript
Abstract
We investigate delegated monitoring by examining the determinants and effects of including cross-acceleration provisions in public debt contracts. We find that cross-acceleration provision use depends on borrowers' going concern relative to liquidation values, debt repayment structures, credit quality, and financial reporting quality. This suggests that the use of cross-acceleration provisions increases when the costs of cascading defaults are lower, the conflicts between creditor classes are higher, and the benefits of delegating monitoring to banks are higher. We also find a lower interest rate on public debt contracts with cross-acceleration provisions, but the rate reduction depends on borrowers' financial reporting quality.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-NoDerivatives
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DOI of Published Version
https://doi.org/10.1016/j.jacceco.2011.12.002
