Corporate Loan Spreads, Market Power, and the Default-Free Rate

2010 ◽  
Author(s):  
Aron A. Gottesman
Keyword(s):  
Market Power ◽  
Loan Spreads ◽  
Corporate Loan ◽  
Free Rate

Corporate Loan Spreads and Economic Activity

2020 ◽  
Author(s):  
Anthony Saunders ◽  
Alessandro Spina ◽  
Sascha Steffen ◽  
Daniel Streitz
Keyword(s):  
Economic Activity ◽  
Loan Spreads ◽  
Corporate Loan

Confidentiality in loan credit agreements

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ca Nguyen ◽  
Alejandro Pacheco
Keyword(s):  
Fixed Effects ◽  
Market Competition ◽  
Least Square ◽  
Loan Pricing ◽  
Product Markets ◽  
Content Type ◽  
Public Firms ◽  
Loan Contracts ◽  
Loan Spreads ◽  
Corporate Loan

PurposeThis study has two primary objectives. First, it analyzes the information content of confidentiality strictness in corporate loan credit agreements. Second, it examines how confidentiality strictness impacts covenant design, lending syndicate structure and loan pricing.Design/methodology/approachUsing a sample of 6,327 loan credit agreements originated by US public firms in the period of 1996–2017, this study measures the confidentiality strictness in loan contracts using textual analyses that capture the appearance of confidentiality-related words and the length of confidentiality provision. All regressions include relevant loan characteristics, firm-specific accounting variables, industry and year fixed effects. To address the endogeneity concern, the paper uses borrowing firms' rival cash holdings and R&D expenditures to instrument for confidentiality strictness in two-staged least square regressions.FindingsBorrowers which have higher R&D and operate in more competitive product markets have tighter confidentiality policies. Furthermore, this study reveals that confidentiality strictness is negatively associated with the imposition of financial covenants, especially performance covenants. Loan contracts for borrowers with stricter confidentiality on average have more relaxed covenant intensity, measured by the number of covenants. The study also shows that stricter confidentiality attracts finance companies, which have strong expertise in product markets of their parent firms, into the lending syndicate. However, confidentiality-conscious borrowers with higher degree of information asymmetry are subject to higher loan spreads.Originality/valueThis study provides the first examination of confidentiality policies in loan contracts and supports the idea that loan provisions are not simply made of “boilerplate” language. The results suggest that, for confidentiality-sensitive borrowers, the greater exposure to product market competition helps control managerial slack and substitute monitoring from financial markets.

scholarly journals Performance Pricing Covenants and Corporate Loan Spreads

2013 ◽  
Author(s):  
Kamphol Panyagometh ◽  
Gordon S. Roberts ◽  
Aron A. Gottesman ◽  
Mehdi Beyhaghi
Keyword(s):  
Performance Pricing ◽  
Loan Spreads ◽  
Corporate Loan

scholarly journals Negotiation and the Clustering of Corporate Loan Spreads

2013 ◽  
Author(s):  
Stefanie Kleimeier ◽  
Sajid M. Chaudhry
Keyword(s):  
Loan Spreads ◽  
Corporate Loan

scholarly journals Forward Guidance and Corporate Lending

2021 ◽  
Author(s):  
Manthos D Delis ◽  
Sizhe Hong ◽  
Nikos Paltalidis ◽  
Dennis Philip
Keyword(s):  
Bank Lending ◽  
Open Market ◽  
Federal Open Market Committee ◽  
Lending Relationships ◽  
Forward Guidance ◽  
Performance Pricing ◽  
Syndicate Structure ◽  
Lending Decisions ◽  
Loan Spreads ◽  
Corporate Loan

Abstract We suggest that forward guidance, via publicly committing the central bank to future actions and creating associated expectations, fundamentally affects bank lending decisions independently of other forms of monetary policy. To test this hypothesis, we build a forward guidance measure based on the language used in the Federal Open Market Committee meetings and match this measure with syndicated loans. Our results show that expansionary forward guidance decreases corporate loan spreads and that this effect is stronger for well-capitalized banks lending to riskier firms. Forward guidance also affects nonprice lending terms, such as covenants, performance pricing provisions, and the loan syndicate structure. Additionally, banks tend to initiate new lending relationships with lower spreads after forward guidance issuance.

scholarly journals Performance Pricing Covenants and Corporate Loan Spreads

2011 ◽  
Author(s):  
Kamphol Panyagometh ◽  
Gordon S. Roberts ◽  
Aron A. Gottesman
Keyword(s):  
Performance Pricing ◽  
Loan Spreads ◽  
Corporate Loan

Effects of Bank Regulation and Lender Location on Loan Spreads

2012 ◽  
Vol 47 (6) ◽  
pp. 1247-1278 ◽  
Author(s):  
Li Hao ◽  
Debarshi K. Nandy ◽  
Gordon S. Roberts
Keyword(s):  
Information Asymmetry ◽  
Market Power ◽  
Agency Costs ◽  
Banking Sector ◽  
Market Concentration ◽  
Theoretical Research ◽  
Informational Efficiency ◽  
High Concentration ◽  
Loan Spreads ◽  
Levels Of Integration

AbstractWe investigate how differences in regulation regarding banking-commerce integration and banking sector concentration influence loan spreads across 29 countries. Theoretical research posits conflicting effects based on agency costs, information asymmetry costs, and market power. Increased integration is associated with lower loan spreads in countries with low concentration, but moving to high levels of integration increases spreads in countries with high concentration. Starting from lower levels, an increase in integration is associated with an increase in informational efficiency that disappears at higher levels of integration. We also show that market concentration affects loan spreads differently under high-, medium-, and low-integration regimes.

Bank Corporate Loan and Net Interest Margins

2017 ◽  
Vol 24660396 ◽  
pp. 75-94
Author(s):  
Sang wook Lee ◽  
Keyword(s):  
Interest Margins ◽  
Corporate Loan

Vertical Boilerplate

2017 ◽  
Author(s):  
James Gibson
Keyword(s):  
Market Power ◽  
Real World ◽  
Empirical Work ◽  
Full Scale ◽  
Market Mechanism ◽  
Law School ◽  
Information Cost ◽  
Information Costs ◽  
Policy Proposals ◽  
Radical Solution

Despite what we learn in law school about the “meeting of the minds,” most contracts are merely boilerplate—take-it-or-leave-it propositions. Negotiation is nonexistent; we rely on our collective market power as consumers to regulate contracts’ content. But boilerplate imposes certain information costs because it often arrives late in the transaction and is hard to understand. If those costs get too high, then the market mechanism fails. So how high are boilerplate’s information costs? A few studies have attempted to measure them, but they all use a “horizontal” approach—i.e., they sample a single stratum of boilerplate and assume that it represents the whole transaction. Yet real-world transactions often involve multiple layers of contracts, each with its own information costs. What is needed, then, is a “vertical” analysis, a study that examines fewer contracts of any one kind but tracks all the contracts the consumer encounters, soup to nuts. This Article presents the first vertical study of boilerplate. It casts serious doubt on the market mechanism and shows that existing scholarship fails to appreciate the full scale of the information cost problem. It then offers two regulatory solutions. The first works within contract law’s unconscionability doctrine, tweaking what the parties need to prove and who bears the burden of proving it. The second, more radical solution involves forcing both sellers and consumers to confront and minimize boilerplate’s information costs—an approach I call “forced salience.” In the end, the boilerplate experience is as deep as it is wide. Our empirical work should reflect that fact, and our policy proposals should too.

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