Abstract
This paper reports the results of an interview survey of 48 Australian bank lending officers on the use of financial covenants in bank‐loan contracts. A wide variety of financial covenants appear to be used. As expected, the accounting measurement rules were generally conservative in nature but they appeared to be less restrictive in other areas. The results were compared with similar studies of Australian public‐debt contracts and US and UK bank‐loan contracts and considerable cross‐market diversity was noted. Evidence on the frequency and method of monitoring these covenants is also documented.
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