---
title: Effects of an interest coverage ratio covenant on optimal capital structure and firm value
url: https://www.ml-quant.com/papers/repec/hal-journl-hal-05724500/
site: ML-Quant (https://www.ml-quant.com)
updated: 2026-10-23
license: Summaries CC BY 4.0; links go to the original sources
index: https://www.ml-quant.com/llms.txt
identifier: RePEc:hal:journl:hal-05724500
source_url: https://econpapers.repec.org/RePEc:hal:journl:hal-05724500
featured: 2026-10-23
citations: unknown
topic: Risk, Credit & Banking
---


# Effects of an interest coverage ratio covenant on optimal capital structure and firm value

A capital structure model shows that interest coverage ratio covenants can improve firm value by reducing default costs, though they constrain shareholder discretion.

- Source: https://econpapers.repec.org/RePEc:hal:journl:hal-05724500
- Identifier: RePEc:hal:journl:hal-05724500
- Released: 2026-10-19
- First featured: Quant Letter No. 136 (2026-10-23): https://www.ml-quant.com/issues/2026-10-23/
- Citations (Semantic Scholar): not tracked
- Published in: not yet
- Topic: Risk, Credit & Banking
- Authors: Michi Nishihara, Takashi Shibata, Benoît Chevalier-Roignant

## Related

- [Attention-based Dynamic Multilayer Graph Neural Networks for Loan Default Prediction](https://www.ml-quant.com/papers/arxiv/2402.00299/): A dynamic multilayer network model has been created for improved credit risk assessment, considering borrower connections and their evolution over time.
- [AI Agents in Financial Markets: Architecture, Applications, and Systemic Implications](https://www.ml-quant.com/papers/arxiv/2603.13942/): Recent AI advancements are enhancing financial automation by creating integrated systems that use autonomous agents for better decision-making and processing, highlighting the need for effective agent governance.
- [Asset Prices, Collateral and Bank Lending: The Case of COVID-19 and Real Estate](https://www.ml-quant.com/papers/ssrn/4470421/): The paper investigates the euro area's banking system's role in transmitting asset price shocks to credit during the Covid-19 crisis, highlighting significant frictions and a decrease in lending related to real estate collateral.
- [Financial Fragilities and Risk-taking of Corporate Bond Funds in the Aftermath of Central Bank Policy Interventions](https://www.ml-quant.com/papers/ssrn/4463970/): It finds that central bank asset purchases during the pandemic led corporate bond fund managers to take more risks, affecting market stability.
- [Financial Instruments for Decarbonization: Likely Pathways for the Romanian Economy](https://www.ml-quant.com/papers/ssrn/4440511/): The study highlights key financial tools in Romania, like green bonds and loans, which can help transition to a low-carbon economy, with banks playing a major role.
- [Optimized Multi-Level Monte Carlo Parametrization and Antithetic Sampling for Nested Simulations](https://www.ml-quant.com/papers/arxiv/2510.18995/): Proposes an improved multilevel Monte Carlo with antithetic sampling to estimate loss probabilities and Value‑at‑Risk more efficiently for irregular payoffs, illustrated in life insurance.