Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103892
Authors: 
Adam, Tim R.
Streitz, Daniel
Year of Publication: 
2014
Series/Report no.: 
SFB/TR 15 Discussion Paper 476
Abstract: 
We examine whether performance-sensitive debt (PSD) is used to reduce hold-up problems in long-term lending relationships. We find that the use of PSD is more common in the presence of a long-term lending relationship and if the borrower has fewer financing alternatives available. In syndicated deals, however, the presence of a relationship lead arranger reduces the use of PSD, which is consistent with hold-up being of lesser concern in such cases. Further, supporting our hypothesis that hold-up concerns motivate the use of PSD, we find a substitution effect between the use of PSD and the tightness of financial covenants.
Subjects: 
Performance-sensitive debt
relationship lending
hold-up
holdout
syndicated debt
covenants
JEL: 
G21
G31
G32
Document Type: 
Working Paper

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