Bondholders use debt covenants to reduce the risk of the debt issued. A frequent type of covenant is for the firm to maintian a specified level of net worth. These net worth covenants often are associated with income escalators, where the required level of net worth increases as the firm reports higher net income (a sign of company growth). Beatty, Webber, and Yu (2008) found that companies with higher information asymmetry were more likely to include income escalator clauses in their net worth covenants. Bondholders are concerned that companies with high information asymmetry allow management the opportunity to act opportunistically against the bondholders by paying excessive dividends or manipulating income to cover up solvency issues. Why are firms with greater information asymmetry willing to include escalator clauses in thier debt covenants?