scholarly journals Local Bankruptcy and Geographic Contagion in the Bank Loan Market*

2019 ◽  
Vol 24 (5) ◽  
pp. 997-1037 ◽  
Author(s):  
Jawad M Addoum ◽  
Alok Kumar ◽  
Nhan Le ◽  
Alexandra Niessen-Ruenzi
Keyword(s):  
Bank Loan ◽  
Economic Conditions ◽  
Financial Health ◽  
Loan Market ◽  
Basis Point ◽  
Point Increase ◽  
Correlated Information ◽  
Loan Spreads

Abstract We examine whether corporate bankruptcies influence bank loan characteristics of geographically proximate firms. Controlling for industry contagion and local economic conditions, firms headquartered near a bankruptcy event experience a 7 basis point increase in loan spreads. The effect is transitory and cannot be fully explained by local correlated information or lenders’ financial health. Instead, the effect is more pronounced for informationally opaque bankruptcies and borrowers, and weakened among loans with relationship lenders and lenders with significant local presence.

scholarly journals FEATURES OF FORMATION OF CREDIT POLICY AND CREDIT PORTFOLIO OF COMMERCIAL BANK IN MODERN CONDITIONS

2021 ◽  
Author(s):  
Natalia Ostrovska
Keyword(s):  
Commercial Bank ◽  
Banking Sector ◽  
Cash Flows ◽  
Bank Loan ◽  
Economic Conditions ◽  
Credit Policy ◽  
Loan Portfolio ◽  
Loan Market ◽  
Modern Economic ◽  
Banking Institution

The level of development of production, social infrastructure and the degree of development of society as a whole largely depends on how developed the banking sector of the state is. An important role in fulfilling the tasks is assigned to commercial banks, which can provide credit resources to enterprises and organizations, as well as citizens. In addition, an efficient and stable banking sector is a key factor in the growth of the national economy. The purpose of the article is to determine the features of the formation of credit policy and loan portfolio of a commercial bank in modern economic conditions. The article identifies the features of the formation of credit policy and loan portfolio of a commercial bank in modern economic conditions. It is generalized that the main specific features of credit relations are: their emergence at the stage of redistribution of final income; formation on the basis of return and with the payment of interest; impact on the structure and volume of cash flows and features of the bank loan market. It is proved that the study of the bank loan market involves the analysis of the structure of the loan portfolio, its most important areas are the assessment of the structure of the loan portfolio by type of customers, terms of lending, as well as by type of currency and more. It is determined that the credit policy of a banking institution is one of the main elements of banking policy, which is a strategy and tactics of the bank to attract temporarily free funds in the economy and direct them to credit operations. In the process of credit risk management, an important element is the ability of the bank's management to choose correctly: the sphere of management in which it is advisable to concentrate the bank's lending activities at a given time; "Its client", based on its creditworthiness and other factors that are of paramount importance for the bank in deciding on the possibility of granting a loan, etc. The credit policy of the banking institution determines the priorities in the development and improvement of lending activities, development of the credit process and increase its efficiency and ensures the stability, profitability and liquidity of the bank.

scholarly journals Risk and the Market’s Reaction to M&A Announcements

2021 ◽  
Vol 14 (7) ◽  
pp. 334
Author(s):  
Ye Cai ◽  
Hersh Shefrin
Keyword(s):  
Standard Deviation ◽  
Large Firms ◽  
Total Risk ◽  
Basis Point ◽  
Acquiring Firms ◽  
Risk Sensitive ◽  
Point Increase

We estimate how an acquiring firm’s risk changes depending on whether the market initially judges the acquisition to be neutral, strongly negative, or strongly positive for the shareholders of the acquiring firm. We found that for an average neutral acquisition, the annualized standard deviation of an acquiring firm’s total return declines by 5%. In contrast, acquisitions judged negatively by the market result in a 5% increase in total risk, while acquisitions judged positively by the market feature a 30-basis-point increase in total risk. We found the median acquisition to be value creating, not value destructive. Value destruction tends to be concentrated among large firms and to be associated with extreme negative outliers. Acquiring firms with longholder CEOs are more prone to undertake acquisitions and more prone to take on risk, but are less prone to engage in value-destructive acquisitions than acquiring firms with non-longholder CEOs. In this respect, acquiring firms with non-longholder CEOs are more apt to undertake risky bad acquisitions, especially when their prior returns lie above the industry average. In addition, acquiring firms with non-longholder CEOs are less prone to take on good acquisitions that are high in risk. As a general matter, firms with longholder CEOs are less risk sensitive to changes in prior returns than firms with non-longholder CEOs.

scholarly journals Determinants of shipping bank loan spreads: An empirical study

2017 ◽  
Vol 33 (2) ◽  
pp. 253-275
Author(s):  
강병태 ◽  
김명희 ◽  
Kihwan Lee
Keyword(s):  
Empirical Study ◽  
Bank Loan ◽  
Loan Spreads

Lending relationships, credit ratings and bank loan spreads: evidence from Indonesian listed companies

2020 ◽  
Vol 16 (4) ◽  
pp. 455-479
Author(s):  
Yane Chandera ◽  
Lukas Setia-Atmaja
Keyword(s):  
Fixed Effects ◽  
Credit Ratings ◽  
Listed Companies ◽  
Bank Loan ◽  
Least Squares Regression ◽  
Firm Level ◽  
Content Type ◽  
Lending Relationships ◽  
Loan Spreads ◽  
The Impact

PurposeThis study examines the impact of firm-bank relationships on bank loan spreads and the mitigating role of firm credit ratings on that impact.Design/methodology/approachThe study sample consists of Indonesian publicly listed companies for the period 2006 to 2016; bank-loan data was extracted from the Loan Pricing Corporation Dealscan database. For the degree of firm-bank relationships, the data on each loan is manually computed, using five different methods taken from Bharath et al. (2011) and Fields et al. (2012). All of the regression analyses are controlled for the year fixed effects, heteroscedasticity, and firm-level clustering. To address the endogeneity issues, this study uses several methods, including partitioning the sample, running nearest-neighbour and propensity score matching tests, and using instrumental variables in two-staged least-squares regression models.FindingsIn line with relationship theory and in opposition to the hold-up argument, this study finds that lending relationships reduce bank loan spreads and that the impact is more noticeable among non-rated Indonesian firms. Specifically, each additional unit in the total number of years of a firm-bank relationship and the number of previous loan contracts with the same bank are associated with 7.34 and 9.15 basis-point decreases, respectively, in these loan spreads.Practical implicationsCorporations and banks should maintain close, long-term relationships to reduce the screening and monitoring costs of borrowing. Regulators should create public policies that encourage banks to put more emphasis on relationships in their lending practices, especially in relation to crisis-prone companies.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the impact of lending relationships on bank loan spreads in Indonesia. The study offers insights on banking relationships in emerging markets with concentrated banking industries, underdeveloped capital markets and prominent business-group affiliations.

scholarly journals Corporate Tax Avoidance and Debt Costs

2019 ◽  
Vol 42 (2) ◽  
pp. 117-143 ◽  
Author(s):  
Terry Shevlin ◽  
Oktay Urcan ◽  
Florin P. Vasvari
Keyword(s):  
Private Information ◽  
Information Quality ◽  
Tax Avoidance ◽  
Bank Loan ◽  
Bond Yields ◽  
Corporate Tax ◽  
Cross Sectional ◽  
Negative Effect ◽  
Loan Spreads ◽  
Jel Classifications

ABSTRACT We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms' private information and greater ability to monitor borrowers. JEL Classifications: G31; G32; M10; O16.

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