Publications

You can also find my articles on my Google Scholar profile.

Journal Articles

The Covenant Defeasance Option in Corporate Bonds

Published in Review of Financial Studies, forthcoming, 2026

Corporate bonds include restrictive covenants that may prevent firms from pursuing valuable growth opportunities ex post and are virtually impossible to renegotiate. We study a common but little-known contractual provision—the defeasance option—which allows issuers to immediately remove all covenants without retiring the bond. Our theoretical model predicts, and our empirical analysis confirms, that defeasance inclusion is more likely when covenants are numerous and issuers face financial constraints, uncertainty, and growth opportunities. We also show that investors require lower yields when defeasance is included in non-callable bonds, and higher yields in fixed-price callable bonds, where it raises call risk.

Recommended citation: Bienz, C., Fluck, Z, & Thorburn, K (2026). "The Covenant Defeasance Option in Corporate Bonds" Review of Financial Studies.
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Outcomes, Risk-Taking and Incentives: Evidence from Asset Managers

Published in Journal of Corporate Finance, 2026

We study incentive contracts used by asset management firms in Norway, focusing on how bonus structures impact performance. The incentive contracts in our sample are heterogeneous, with firms rewarding fund managers based on both quantitative and qualitative targets. We find that higher potential bonuses tied to quantitative metrics, such as the information ratio, lead to better risk-adjusted performance at year-end. Managers at risk of missing bonus thresholds attempt to boost performance through portfolio adjustments, but these efforts backfire, resulting in worse outcomes in the latter part of the year.

Recommended citation: Bienz, C., Bonelli, D., Mjøs, A., & Santos, F. (2026). "Outcomes, risk-taking and incentives: Evidence from asset managers." Journal of Corporate Finance.
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Fund Ownership, Wealth, and Risk-Taking: Evidence on Private Equity Managers

Published in Journal of Financial Intermediation, 2023

Private equity (PE) managers are required to invest their own money in the funds they manage. We examine the incentive effects of this ownership on the delegated acquisition decision. A simple model shows that PE managers select less risky firms and use more debt, the higher their ownership. We test these predictions for a sample of Norwegian PE funds, using managers’ wealth to capture their relative risk aversion. As predicted, the target company’s cash-flow risk decreases and leverage increases with the manager’s ownership scaled by wealth. Moreover, the overall portfolio risk decreases with ownership, mitigating widespread concerns about excessive risk-taking.

Recommended citation: Bienz, C., Thorburn, K. S., & Walz, U. (2023). "Fund ownership, wealth, and risk-taking: Evidence on private equity managers." Journal of Financial Intermediation.
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The Dynamics of Venture Capital Contracts

Published in Review of Finance, 2012

Using a detailed German data set on venture capital contracts, the authors document that contracts between venture capitalists (VC) and their portfolio firms specify more complete conditions for future financing for firms that do have no suitable outside financing option and therefore lower ex post bargaining power. The authors’ result is consistent with theories of holdup, where complete contracts protect the entrepreneur from expropriation by the financier. Moreover, there is evidence of learning by VCs. Other possible explanations for observed contracts, such as multitasking or coordination costs, instead have little explanation power.

Recommended citation: Bienz, C., & Hirsch, J. (2012). "The Dynamics of Venture Capital Contracts." Review of Finance.
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Venture Capital Exit Rights

Published in Journal of Economics & Management Strategy, 2010

We investigate when and how venture capital contracts use exit rights such as drag-along and tag-along rights. Utilizing a data set of venture capital contracts from Germany, we find that almost all contracts allocate exit rights to the venture capitalist (VC) rather than to the entrepreneur. In our data set, the vast majority of exit rights deal with the sale of the entire company to a strategic investors rather than with initial public offerings (IPOs). We show that venture capital contracts include exit rights to mitigate potential hold-up problems of the VC in the case of exit.

Recommended citation: Bienz, C., & Walz, U. (2010). "Venture Capital Exit Rights." Journal of Economics & Management Strategy.
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Carsten Bienz