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dc.contributor.authorBeatty, Anne
dc.contributor.authorPetacchi, Reining
dc.contributor.authorZhang, Haiwen
dc.date.accessioned2014-06-04T19:38:37Z
dc.date.available2014-06-04T19:38:37Z
dc.date.issued2012-06
dc.identifier.issn1380-6653
dc.identifier.issn1573-7136
dc.identifier.urihttp://hdl.handle.net/1721.1/87635
dc.description.abstractWe provide large sample evidence that credible hedge commitments reduce the agency costs of debt and that accounting conservatism enhances hedge commitments. We examine 2,338 bank loans entered into by 263 mandatory derivative users that are contractually obligated by interest rate protection covenants, 709 voluntary derivative users, and 1,366 non-users. We show that loan contracts are more likely to include interest rate protection covenants when borrowers are less likely to maintain the hedge position once the financing is completed. We find that borrowers who credibly commit to hedge using these covenants significantly reduce their interest rates. While we do not find an average interest savings for voluntary derivative users, we do find a reduction in their loan rates when they practice conservative financial reporting. Our results suggest that accounting conservatism helps borrowers resolve shareholder-creditor conflicts by committing to maintain their hedge positions after completing debt financing.en_US
dc.description.sponsorshipDeloitte LLPen_US
dc.language.isoen_US
dc.publisherSpringer-Verlagen_US
dc.relation.isversionofhttp://dx.doi.org/10.1007/s11142-012-9189-4en_US
dc.rightsCreative Commons Attribution-Noncommercial-Share Alikeen_US
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/en_US
dc.sourceSSRNen_US
dc.titleHedge commitments and agency costs of debt: evidence from interest rate protection covenants and accounting conservatismen_US
dc.typeArticleen_US
dc.identifier.citationBeatty, Anne, Reining Petacchi, and Haiwen Zhang. “Hedge Commitments and Agency Costs of Debt: Evidence from Interest Rate Protection Covenants and Accounting Conservatism.” Review of Accounting Studies 17, no. 3 (September 2012): 700–738.en_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.mitauthorPetacchi, Reiningen_US
dc.relation.journalReview of Accounting Studiesen_US
dc.eprint.versionOriginal manuscripten_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/NonPeerRevieweden_US
dspace.orderedauthorsBeatty, Anne; Petacchi, Reining; Zhang, Haiwenen_US
dc.identifier.orcidhttps://orcid.org/0000-0002-7469-9753
mit.licenseOPEN_ACCESS_POLICYen_US
mit.metadata.statusComplete


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