Financial ratio covenants in UK bank loan contracts
Article Abstract:
The extent to which financial ratio covenants are used and lenders' reactions to covenant violations and potential violations were surveyed among 50 UK banks. The survey showed that at least two-thirds of loans exceeding one billion pounds sterling were covered by financial ratio covenants. High cost penalties such as immediate loan repayment or conversion to an on-demand loan were imposed on borrowers that violate these covenants. Other lenders renegotiate the contracts with temporary waiver of the breach if the borrower constantly communicates with the bank. Contract renegotiations may involve helping secure the lender's position or ensuring retention of funds within the company by dividend capital spending restrictions. The study also showed that disclosed voluntary accounting policy changes to produce favorable financial statements were not acted on by the lenders in 60% of cases.
Publication Name: Journal of General Management
Subject: Business, general
ISSN: 0306-3070
Year: 1993
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What is the value of an audit report?
Article Abstract:
The association between audit firms' reports and clients' business failure were studied. About 107 companies placed in receivership, creditor's voluntary liquidation or being compulsory wound up were matched with non-failed companies based on company size, turnover and financial status. Results showed that the time between data publication and failure was inversely proportional to the time to qualify for going concern. Also, the weaker financial position of a failing company makes it more likely to receive a going concern qualification. Auditor switching is also more probable for companies that receive a going concern qualification. However, it was found that failure does not necessarily follow a going concern qualification or a non-qualified report. Moreover, no relation with regard to qualification rate was found between larger and smaller audit firms.
Publication Name: Journal of General Management
Subject: Business, general
ISSN: 0306-3070
Year: 1993
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Evaluating Chinese joint venture opportunities using strategic value analysis
Article Abstract:
China has evolved into an attractive market, particularly due to its relatively cheap production base and surging consumer market. Foreign companies planning to capitalize on the Chinese market boom can easily establish a presence in the region through joint ventures. Joint ventures provide ways of avoiding problems posed by the Chinese market, such as unreliable market data, an underdeveloped foreign exchange and stifling bureaucracy. A study on a sample of UK-Chinese joint ventures for the period 1979-1992 shows that UK firms formed joint ventures to gain faster entry to the Chinese market. The ability to negotiate with the Chinese government was considered a crucial factor by UK firms when selecting a Chinese partner.
Publication Name: Journal of General Management
Subject: Business, general
ISSN: 0306-3070
Year: 1996
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