Do firms follow the SEC’s confidential treatment protocols? Evidence from credit agreements

Abstract

AbstractI examine whether firms follow the Securities and Exchange Commission’s confidential treatment protocols when redacting potentially material information from their credit agreements. My findings suggest that most firms may not comply with SEC directives: they withhold potentially material information without following the SEC’s confidential treatment protocols and without making interested parties aware of their information disadvantage. I also find evidence consistent with lender and borrower incentives driving the decision to withhold potentially material information from the credit agreement. My findings are consistent with lenders influencing redaction decisions not out of concern about rivals but because they do not want their other borrowers to see the terms. Finally, I find that the Refinitiv / LPC Dealscan database rarely includes redacted fee data, thus leading to potential biases when fees are included in cost of debt measures.