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Increasing the efficiency of bond covenants: a proposal for the Italian market

Author

Listed:
  • Flavio Bazzana

    (Università degli Studi di Trento)

  • Marco Palmieri

    (Università di Bologna)

Abstract

In Italy the use of bond covenants is restrained by the predominance of SMEs, the significant role of relationship banking, the high costs related to public placements, the lack of investors‘ financial culture, the low amount of loans normally requested by each firm and the lack of liquidity of the secondary market. On the basis of Us experience, the creation of a trustee could help to define debt contract terms to increase the efficiency of covenants market, but Italian corporate bonds law does not allow to adopt this model. New regulation on financial instruments with administrative rights offers more opportunities in order to define a solution coherent with the debt agreements and owners' rights that characterizes bond covenants.

Suggested Citation

  • Flavio Bazzana & Marco Palmieri, 2009. "Increasing the efficiency of bond covenants: a proposal for the Italian market," BANCARIA, Bancaria Editrice, vol. 9, pages 39-58, September.
    • Handle: RePEc:ban:bancar:v:9:y:2009:m:september:p:39-58
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    File URL: http://www.bancariaeditrice.it/prodotti/vedi/prodotto/id/1967/bancaria-n-9-2009
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    More about this item

    Keywords

    innovazione finanziaria; crisi finanziaria; rischio di liquidità; regolamentazione;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G1 - Financial Economics - - General Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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