This paper examines how syndicated loan covenants are influenced by the geographical distance between the lead and the participant bank lenders. We find that greater distance is associated with a higher likelihood that at least one covenant is contained in the loan contract, a higher number of covenants and a higher probability of covenant violation. These results are robust to using the introduction of new airlines as an exogenous shock. Our results suggest that geographic proximity reduces agency conflicts among syndicated loan creditors.​

JEL classification: G21, G32, M41
Keywords: creditor coordination, geographic proximity, debt covenant