Association between restrictive covenants and accounting conservatism: evidence from US public debt

Purpose The purpose of this paper is to investigate the relationship between restrictive covenants and accounting conservatism. More specially, the authors try to explain how the use of restrictive covenants of public debt may affect accounting conservatism. Design/methodology/approach The sample is composed of non-financial firms and for each firm one debt contract is considered. The authors have used the Ball and Shivakumar (2005) models to test the relationships. All variables were retrieved from Mergent Fixed Investment Securities and COMPUSTAT Databases. Findings The findings of this study show that the more the firm relies on bond covenants, the higher is the degree of conservatism. The authors found also that these firms also exhibited a widely significantly increased level of conservatism in the years following the issuance of debt. Research limitations/implications The results should be interpreted with caution because the use of covenants does not take into consideration the tightness of their inclusion in the public debt contract. Originality/value This paper makes a timely contribution to the debate of timely loss recognition by confirming the complementarity between the inclusion of restrictive covenants in the debt agreement and the accounting conservatism before and after the emission of public debt.

23. Freehold Covenants

All books in this flagship series contain carefully selected substantial extracts from key cases, legislation, and academic debate, providing able students with a stand-alone resource. This chapter investigates how certain covenants relating to land between freehold owners can overcome the normal privity of contract rule and can be enforced by and against third parties. Restrictive covenants significantly control land use and supplement and complement public planning laws. The burden of a negative covenant will not run at common law, but may run in equity by virtue of the rule in Tulk v Moxhay. The benefit of a restrictive covenant will run if it is: expressly assigned; annexed to the land; or subject to a building scheme. The Lands Chamber of the Upper Tribunal has jurisdiction under s 84 of the Law of Property Act 1925 to modify or extinguish restrictive covenants. Reform recommendations offer a final acknowledgement that both negative and positive covenants affecting land should be ‘genuine proprietary interests’ rather than ‘a peculiar species of personal contract’.

Restrictive covenants, use of land, and the restraint of trade doctrine

The common law doctrine of restraint of trade has a well-established presence in relation to contracts of employment and contracts for the sale of a business. Beyond those specific areas it reared its head from time to time, but the legal test for its applicability was not a model of clarity. Where the covenantor ceded a pre-existing freedom to engage in commercial activity, the decision of the House of Lords in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 brought it within the doctrine, but the recent decision of the Supreme Court in Peninsula Securities Ltd v Dunnes Stores (Bangor) Ltd [2020] UKSC 36, on appeal from the Northern Ireland Court of Appeal [2018] NICA 7, has discarded that test in favour of one based on the structure of a trading society. Peninsula Securities was a case concerned with the applicability of the restraint of trade doctrine to covenants affecting the ability of a landowner and its successors in title to use the land in a way that potentially competed with the business of an adjoining occupier. The decision that the restraint of trade doctrine was not engaged in these circumstances was set against the power of the Lands Tribunal to modify or extinguish covenants affecting land under article 5 of the Property (NI) Order 1978.

Dividing the City: Race-Restrictive Covenants and the Architecture of Segregation in St. Louis

Dividing the City uses a newly discovered, parcel-level, record of restrictive covenants (circa 1850-1950) to document the scope, variety, location, timing, dissemination, and impact of racial restrictions in the City of St. Louis. We underscore the important differences, in their use and their impact, between new subdivision restrictions and petition-based restrictive agreements in older neighborhoods. And we establish the importance of these restrictions to both a dramatic increase in residential segregation before 1950 and the maintenance of that segregation—through public and private policies that emulated and adapted these restrictions even after the Supreme Court held them unenforceable—across the ensuing decades.

THE CONCEPT OF NON-COMPETE PROVISIONS IN EMPLOYMENT RELATIONS

This article analyzes the regulation of restrictive covenants in employment contracts in foreign and Russian law, as well as the importance of this institution for protection of the interests of employers. In the course of their employment, employees, particularly those in managerial positions, acquire detailed information about the employer's business. Such information can then be used for the benefit of the new employer or the employee themselves in their own business activities. In order to manage this risk at the level of the employment contract, the foreign law has developed the concept of restrictive covenants. This article discusses the pre-conditions of the negative approach which has been developed in the Russian law to the inclusion of such provisions in the employment contract and the effectiveness of instruments used instead of them in practice, in particular trade secret and unfair competition, as well as Article 276 of the Russian Labour Code. The problem of the employer's lack of appropriate measures to protect their interests in the modern labor law of the Russian Federation and the need to supplement domestic legislation with provisions regulating restrictive covenants is raised.