Journal articles: 'Loan contracting'

1

Udell, Gregory F. "Loan quality, commercial loan review and loan officer contracting." Journal of Banking & Finance 13, no. 3 (July 1989): 367–82. http://dx.doi.org/10.1016/0378-4266(89)90048-4.

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Ge, Wenxia, Tony Kang, Gerald J. Lobo, and Byron Y. Song. "Investment decisions and bank loan contracting." Asian Review of Accounting 25, no. 2 (May 2, 2017): 262–87. http://dx.doi.org/10.1108/ara-03-2016-0027.

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Purpose The purpose of this paper is to examine how a firm’s investment behavior relates to its subsequent bank loan contracting. Design/methodology/approach Using a sample of US firms during the period 1992-2011, the authors examine the association between overinvestment (underinvestment) and three characteristics of bank loan contracts: loan spread, collateral requirement, and loan maturity. Findings The authors find that overinvesting firms obtain loans with higher loan spreads. Additional tests show that the effect of overinvestment on loan spreads is generally more pronounced in firms with lower reputation, weaker shareholder rights, and lower institutional ownership. The effect of overinvestment on collateral requirement is mixed, and investment efficiency has no significant relation to loan maturity. Research limitations/implications The results are subject to the following caveats. First, while the study provides empirical evidence that investment efficiency affects bank loan contracting terms, especially the cost of bank loans, the underlying theory is not well-developed. The authors leave it up to future research to provide a theoretical framework to clearly distinguish the cash flow and credit risk effects of past investment behavior from those of existing agency conflicts. Second, due to data limitation, the sample size is small, especially when the authors control for corporate governance measured by G-index and institutional ownership. Practical implications The finding that overinvestment is costly to corporations suggests that managers should consider the potential trade-offs from such investment decisions carefully. The evidence also alerts shareholders and board members to the importance of monitoring management investment decisions. In addition, the authors find that corporate governance moderates the relationship between investment decisions and cost of bank loans, suggesting that it would be beneficial to design effective governance mechanisms to prevent management from empire building and motivate managers to pursue efficient investment strategies. Originality/value First, the findings enhance understanding of the potential economic consequences of overinvestment decisions in the context of a firm’s private debt contracting. The evidence suggests that lenders perceive higher credit risk from overinvestment than from underinvestment, likely because firms squander cash in the current period by investing in (negative net present value) projects that are likely to result in future cash flow problems. Second, the study contributes to the literature on the determinants of bank loans by identifying an observable empirical proxy for uncertainty in future cash flows that increases credit risk.

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Drucker, Steven, and Manju Puri. "On Loan Sales, Loan Contracting, and Lending Relationships." Review of Financial Studies 22, no. 7 (July 2, 2008): 2835–72. http://dx.doi.org/10.1093/rfs/hhn067.

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Chong, Dazhi, Ling Li, Harris Wu, Jong Park, Hui Shi, and Gongjun Yan. "Social Media Sentiment and Bank Loan Contracting." Journal of Industrial Integration and Management 03, no. 01 (March 2018): 1850007. http://dx.doi.org/10.1142/s2424862218500070.

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This study analyzes how social media affects bank loan contracting. Using a sample of 642 US bank loan contracts, we hypothesize that social media can enhance information dissemination and mitigate the information asymmetry between borrowers and lenders. Consistent with this hypothesis, we find that borrowers that receive positive social media user opinion on social media enjoy more favorable price of bank loan contracts. Additional analyses indicate that the relations among social media user opinion and bank loan price vary with the firm size, loan structure and availability of public information of borrowers. Overall, this research provides evidence that social media reduces cost of bank loans by decreasing information asymmetry between borrowers and lenders in the capital markets.

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Yang, Ziyun. "Customer concentration, relationship, and debt contracting." Journal of Applied Accounting Research 18, no. 2 (May 8, 2017): 185–207. http://dx.doi.org/10.1108/jaar-04-2016-0041.

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Purpose The purpose of this paper is to examine the effect of a firm’s customer base concentration on its loan contract terms and how this effect varies with the strength of its customer relationship. Design/methodology/approach This study is an archival research based on a sample of US public firms that have loan contract data between 1990 and 2008. Major customer sales data are used to construct customer concentration and customer relationship measures. A debt contract model is employed to relate loan spread and other contract terms to customer concentration and relationship. Findings This study finds that firms with more concentrated customer bases have higher loan spread and shorter loan maturity and are more likely to issue secured loans. These negative effects disappear when the supplier firm maintains strong relationship with its customers. Research limitations/implications Additional forward-looking measure of customer relationship could benefit future research. Practical implications A firm’s customer base characteristics can have significant impacts on the terms of its loan contracts. Findings from this study support the notion that customer relationship is an important intangible asset that is informative to stakeholders of the firm. Originality/value This study proposes a new measure of customer relationship based on the past repeated relationships between a firm and its major customers. It shows that customer characteristics may affect firms’ contracts with creditors: customer base concentration increases credit risk whereas strong customer relationship improves credit quality.

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Freudenberg, Felix, Björn Imbierowicz, Anthony Saunders, and Sascha Steffen. "Covenant violations and dynamic loan contracting." Journal of Corporate Finance 45 (August 2017): 540–65. http://dx.doi.org/10.1016/j.jcorpfin.2017.05.009.

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Lin, Chih-Yung, Yehning Chen, Po-Hsin Ho, and Ju-Fang Yen. "CEO overconfidence and bank loan contracting." Journal of Corporate Finance 64 (October 2020): 101637. http://dx.doi.org/10.1016/j.jcorpfin.2020.101637.

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Francis, Bill, Iftekhar Hasan, Michael Koetter, and Qiang Wu. "CORPORATE BOARDS AND BANK LOAN CONTRACTING." Journal of Financial Research 35, no. 4 (December 2012): 521–52. http://dx.doi.org/10.1111/j.1475-6803.2012.01327.x.

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GRAHAM, J., S. LI, and J. QIU. "Corporate misreporting and bank loan contracting☆." Journal of Financial Economics 89, no. 1 (July 2008): 44–61. http://dx.doi.org/10.1016/j.jfineco.2007.08.005.

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Francis, Bill B., Iftekhar Hasan, and Yun Zhu. "Political uncertainty and bank loan contracting." Journal of Empirical Finance 29 (December 2014): 281–86. http://dx.doi.org/10.1016/j.jempfin.2014.08.004.

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11

Fang, Xiaohua, Yutao Li, Baohua Xin, and Wenjun Zhang. "Financial Statement Comparability and Debt Contracting: Evidence from the Syndicated Loan Market." Accounting Horizons 30, no. 2 (March 1, 2016): 277–303. http://dx.doi.org/10.2308/acch-51437.

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SYNOPSIS In this study, we examine whether and how borrowing firms' financial statement comparability affects the contracting features of syndicated loans. Using a sample of loans issued by U.S. public firms in the syndicated loan market over the period 1992–2008, we find strong and robust evidence that financial statement comparability is negatively associated with loan spread and the likelihood of pledging collateral, and positively associated with loan maturity and the likelihood of including performance pricing provisions in loan contracts. We also find that borrowing firms with greater financial statement comparability are able to complete the loan syndication process more swiftly, form loan syndicates enabling the lead lenders to retain smaller percentages of loan shares, and attract a greater number of lenders and, particularly, a greater number of uninformed participating lenders. Altogether, these findings are consistent with the view that financial statement comparability plays an important role in alleviating information asymmetry in the syndicated loan market. JEL Classifications: G12; G14; M41

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Chen, Gary, Jeong-Bon Kim, Jee-Hae Lim, and Jie Zhou. "XBRL Adoption and Bank Loan Contracting: Early Evidence." Journal of Information Systems 32, no. 2 (February 1, 2017): 47–69. http://dx.doi.org/10.2308/isys-51688.

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ABSTRACT We examine how the adoption of the eXtensible Business Reporting Language (XBRL) for financial reporting impacts the pricing of bank loans. Using a sample of loans granted to U.S. borrowers from 2007–2013, we find that the adoption of XBRL is associated with a reduction in loan spreads. We further find that the reduction in loan spreads is greater for borrowers who have information that is inherently costlier to process. Results from a difference-in-differences specification along with other alternative research designs provide similar inferences. Subsequent to XBRL adoption, we further show that loan spreads are lower for firms that use more standardized XBRL tags and greater for those that use more extension elements. Overall, our results are consistent with the view that the XBRL mandate brings about an environment that enables lenders to gather and process information in a timelier manner and at a lower cost. JEL Classifications: M41; K22.

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Hasan, Iftekhar, and Liang Song. "Public disclosure and bank loan contracting: evidence from emerging markets." Asian Review of Accounting 22, no. 1 (April 29, 2014): 2–19. http://dx.doi.org/10.1108/ara-10-2013-0069.

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Purpose – The purpose of this paper is to fill this void in the existing literature and investigate how firms’ disclosure policies influence bank loan contracting in emerging markets after controlling for the influence of borrowers’ private information obtained by banks. Furthermore, the paper examines how firms’ disclosure and non-disclosure governance interact to affect financial contracts. Design/methodology/approach – The key variables Disclosure and Firm Governance are based on a survey by Credit Lyonnais Securities Asia (CLSA) in 2000. The paper hand-merges CLSA disclosure and governance data with the Dealscan database and Worldscope database by firm names. The paper conducts a multivariate analysis to investigate how firms’ disclosure policies influence bank loan contracting and how firms’ disclosure and non-disclosure governance interact to affect financial contracts. Findings – The authors found that firms with superior disclosure policies obtain bank loans with more favorable loan contracting terms, such as larger amounts, longer maturity, and lower spread. In addition, the effects of disclosure on bank loan contracting are more pronounced for borrowers with superior firm-level non-disclosure governance or firms located in a country with better country-level governance. Originality/value – The paper provides a more comprehensive view of the effects of corporate disclosure has on financial contracts in emerging economies.

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한병석 and 강형구. "History of Derivatives Contracting on Student Loan." Review of Business History 30, no. 2 (June 2015): 163–83. http://dx.doi.org/10.22629/kabh.2015.30.2.008.

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15

Hsieh, Tien‐Shih, Byron Y. Song, Ray R. Wang, and Xinlu Wang. "Management earnings forecasts and bank loan contracting." Journal of Business Finance & Accounting 46, no. 5-6 (February 20, 2019): 712–38. http://dx.doi.org/10.1111/jbfa.12371.

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Alimov, Azizjon. "Labor Protection Laws and Bank Loan Contracting." Journal of Law and Economics 58, no. 1 (February 2015): 37–74. http://dx.doi.org/10.1086/682908.

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Kim, Jeong-Bon, Byron Y. Song, and Zheng Wang. "Special purpose entities and bank loan contracting." Journal of Banking & Finance 74 (January 2017): 133–52. http://dx.doi.org/10.1016/j.jbankfin.2016.10.006.

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He, Zhongda, Guannan Qiao, Le Zhang, and Wenrui Zhang. "Regulator supervisory power and bank loan contracting." Journal of Banking & Finance 126 (May 2021): 106062. http://dx.doi.org/10.1016/j.jbankfin.2021.106062.

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Miao, Meng, Guanjie Niu, and Thomas Noe. "Contracting without contracting institutions: The trusted assistant loan in 19th century China." Journal of Financial Economics 140, no. 3 (June 2021): 987–1007. http://dx.doi.org/10.1016/j.jfineco.2021.02.005.

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20

Deng, Saiying, Richard H. Willis, and Li Xu. "Shareholder Litigation, Reputational Loss, and Bank Loan Contracting." Journal of Financial and Quantitative Analysis 49, no. 4 (August 2014): 1101–32. http://dx.doi.org/10.1017/s002210901400057x.

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AbstractWe examine shareholder litigation and the price and nonprice terms of bank loan contracts. After filing a lawsuit, defendant firms pay higher loan spreads and up-front charges, experience more financial covenants, and are more likely to have a collateral requirement. These findings are consistent with reputational losses associated with shareholder litigation. The magnitude of a firm’s lost market value when the lawsuit is filed is positively related to the increase in the firm’s future borrowing costs. We investigate whether the lawsuit allegations and its merit affect future bank loan terms. Our results do not appear to be affected by self-selection.

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21

Li, Shihong. "SOX 404 and debt contracting value of accounting information." International Journal of Accounting & Information Management 26, no. 3 (August 6, 2018): 384–412. http://dx.doi.org/10.1108/ijaim-03-2017-0042.

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Purpose This paper aims to investigate whether the Section 404 of Sarbanes–Oxley Act (SOX 404) changed the way banks use accounting information to price corporate loans. Design/methodology/approach The study uses a sample of 1,173 US-listed firms that issued syndicated loans both before and after their compliance with SOX 404 to analyze the changes in loan spread’s sensitivity to some key accounting metrics such as ROA, interest coverage, leverage and net worth. Findings The study finds that the interest spread’s sensitivity to key accounting metrics, most noticeably for ROA, declined following the borrower’s compliance with the requirements of SOX 404. The decline was not explainable by borrowers that disclosed internal control weaknesses but concentrated among borrowers suspected of real earnings management (REM). Originality/value By examining the effects of SOX 404 on banks’ pricing process, this study augments the literature on SOX’s economic consequences. The findings suggest that lenders perceive little new information from SOX 404 disclosures of internal control deficiencies and are cautious about the accounting information provided by REM borrowers. It also extends the research on the use of accounting information in debt contracting. By examining loan interest’s sensitivity to accounting metrics, it broadens the concept of debt contracting value of accounting information to include accounting’s usefulness for assessing credit risk at loan inception.

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Deng, Saiying, Vincent J. Intintoli, and Andrew Zhang. "CEO Turnover, Information Uncertainty, and Debt Contracting." Quarterly Journal of Finance 09, no. 02 (March 25, 2019): 1950001. http://dx.doi.org/10.1142/s2010139219500010.

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CEO turnovers are important corporate events that can lead to significant changes within the firm. We find that CEO departures are associated with a subsequent increase in bank loan financing. The negative effect that CEO departures have on borrowing costs is largely driven by forced CEO turnovers. Following such departures, firms pay higher loan spreads, see an increase in covenants, and are more likely to be subject to collateral requirements, when compared to matched non-turnover and voluntary turnover firms. Evidence suggests that asset substitution and changes in accounting information quality help to explain the observed worsened terms following forced dismissals. On the other hand, more traditional voluntary departures are unrelated to changes in price and non-price loan terms.

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23

Račić, Ranka. "(Im)permissibility of contracting the fee for loan processing costs in Bosnia and Herzegovina law." Pravo i privreda 58, no. 3 (2020): 270–88. http://dx.doi.org/10.5937/pip2003270r.

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The paper analyses the legal aspects of the issue related to the (im)permissibility of contracting fees for loan processing costs. This issue has recently become acute in the law of Bosnia and Herzegovina. The first court decision, which determined that the provision on the costs of loan processing is null and void, was passed in the Brcko District of Bosnia and Herzegovina. After this decision went into effect, dozens of lawsuits have been filed before the courts in Bosnia and Herzegovina requesting the court to determine that the provision on reimbursement of loan processing costs is null and void. Therefore, the focus of the research is on reviewing the legal framework for contracting fees for loan processing costs, as well as on reviewing the court decisions with different legal opinions taken on this issue and the consequences of passed court decisions for the parties. The analysis shows that the contracting of a fee for the costs of loan processing is allowed if these are actual costs whose content is clearly determined.

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Hasan, Iftekhar, Chun Keung Hoi, Qiang Wu, and Hao Zhang. "Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds." Journal of Financial and Quantitative Analysis 52, no. 3 (May 3, 2017): 1017–47. http://dx.doi.org/10.1017/s0022109017000205.

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We find that firms headquartered in U.S. counties with higher levels of social capital incur lower bank loan spreads. This finding is robust to using organ donation as an alternative social capital measure and incremental to the effects of religiosity, corporate social responsibility, and tax avoidance. We identify the causal relation using companies with a social-capital-changing headquarters relocation. We also find that high-social-capital firms face loosened nonprice loan terms, incur lower at-issue bond spreads, and prefer public bonds over bank loans. We conclude that debt holders perceive social capital as providing environmental pressure that constrains opportunistic firm behaviors in debt contracting.

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Hasan, Iftekhar, Jong Chool Park, and Qiang Wu. "The Impact of Earnings Predictability on Bank Loan Contracting." Journal of Business Finance & Accounting 39, no. 7-8 (July 5, 2012): 1068–101. http://dx.doi.org/10.1111/j.1468-5957.2012.02292.x.

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Francis, Bill, Iftekhar Hasan, and Qiang Wu. "The Impact of CFO Gender on Bank Loan Contracting." Journal of Accounting, Auditing & Finance 28, no. 1 (October 3, 2012): 53–78. http://dx.doi.org/10.1177/0148558x12452399.

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Kim, Jeong-Bon, Byron Y. Song, and Theophanis C. Stratopoulos. "Does Information Technology Reputation Affect Bank Loan Terms?" Accounting Review 93, no. 3 (October 1, 2017): 185–211. http://dx.doi.org/10.2308/accr-51927.

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ABSTRACT This study investigates whether Information Technology (IT) reputation, captured by the accumulation of consistent IT capability signals, influences bank loan contracting even though banks have access to inside information. We predict that IT reputation is associated with better loan terms because it lowers credit risk via its impact on default and information risks. Results based on 4,218 loan facility-years reveal, as predicted, that firms with a reputation for IT capability tend to have more favorable price and non-price terms for loan contracts and are less likely to have their credit rating downgraded or to report internal control weaknesses than firms with no IT reputation. The study contributes to the banking and IT business value literature by showing that banks incorporate borrowers' nonfinancial characteristics, such as IT reputation, into loan contracting terms. JEL Classifications: G21; G32; M41; O32. Data Availability: All data are available from sources identified in the study.

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Kim, Jeong-Bon, Byron Y. Song, and Liandong Zhang. "Internal Control Weakness and Bank Loan Contracting: Evidence from SOX Section 404 Disclosures." Accounting Review 86, no. 4 (April 1, 2011): 1157–88. http://dx.doi.org/10.2308/accr-10036.

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ABSTRACT Using a sample of borrowing firms that disclosed internal control weaknesses (ICW) under Section 404 of the Sarbanes-Oxley Act, this study compares various features of loan contracts between firms with ICW and those without ICW. Our results show the following. First, the loan spread is higher for ICW firms than for non-ICW firms by about 28 basis points, after controlling for other known determinants of loan contract terms. Second, firms with more severe, company-level ICW pay significantly higher loan rates than those with less severe, account-level ICW. Third, lenders impose tighter nonprice terms on firms with ICW than on those without ICW. Fourth, fewer lenders are attracted to loan contracts involving firms with ICW. Finally, our within-firm analyses show that banks increase loan rates charged to ICW firms after their disclosure of internal control problems and that banks reduce loan rates after firms remediate previously reported ICW.

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Chen, Tai-Yuan, Chen-Lung Chin, Shiheng Wang, and Wei-Ren Yao. "The Effects of Financial Reporting on Bank Loan Contracting in Global Markets: Evidence from Mandatory IFRS Adoption." Journal of International Accounting Research 14, no. 2 (January 1, 2015): 45–81. http://dx.doi.org/10.2308/jiar-51031.

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ABSTRACT This study examines the effects of the mandatory adoption of International Financial Reporting Standards (IFRS) on the contract terms of bank loans in a global setting. Using a difference-in-differences design based on 26,474 bank loans in 31 countries during the 2000–2011 period, we find that borrowers who mandatorily adopt IFRS experience an increase in interest rates, a reduction in the use of accounting-based financial covenants, an increase in the likelihood that a loan is collateralized, a reduction in loan maturity, and an increase in the fraction of a loan retained by lead arrangers. These findings are robust to the removal of the 2008 financial crisis from our analysis, as well as to the matching of IFRS and non-IFRS borrowers on various country- and firm-level characteristics. Furthermore, we find that these changes are more pronounced for borrowers with greater financial reporting changes, as well as those with poorer accounting quality after IFRS adoption. JEL Classifications: G15; G21; F34; M41.

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Bozanic, Zahn, Lin Cheng, and Tzachi Zach. "Soft Information in Loan Agreements." Journal of Accounting, Auditing & Finance 33, no. 1 (February 1, 2017): 40–71. http://dx.doi.org/10.1177/0148558x16689653.

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In this study, we seek to understand whether soft information conveyed by contracting language found in private loan agreements is informative regarding borrower risk. We proxy for credit-risk-relevant soft information using Loughran and McDonald’s uncertainty measure. We first examine initial contract terms and find that, incremental to traditional summary measures of credit risk, increased contractual uncertainty is associated with higher initial loan spreads and a greater likelihood of using dynamic and performance-pricing covenants. We then turn to examine realized credit risk over the life of the loan and find that increased uncertainty is associated with a higher likelihood of future loan downgrades and loan amendments. We corroborate our results on the risk relevance of soft information by showing that the bid-ask spreads of loans trading on the secondary loan market are increasing in uncertainty. Overall, the evidence we provide is consistent with embedded linguistic cues in loan agreements publicly revealing the credit risk assessments of privately informed lenders.

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31

Haß, Lars Helge, Skrålan Vergauwe, and Zhifang Zhang. "State-ownership and bank loan contracting: evidence from corporate fraud." European Journal of Finance 25, no. 6 (May 22, 2017): 550–67. http://dx.doi.org/10.1080/1351847x.2017.1328454.

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32

Lin, Zhijun, Byron Y. Song, and Zhimin Tian. "Does director-level reputation matter? Evidence from bank loan contracting." Journal of Banking & Finance 70 (September 2016): 160–76. http://dx.doi.org/10.1016/j.jbankfin.2016.04.021.

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33

Song, Liang, and Joel C. Tuoriniemi. "Accounting quality, governance standards, and syndicated loan contracts." Pacific Accounting Review 28, no. 1 (February 1, 2016): 2–15. http://dx.doi.org/10.1108/par-10-2014-0035.

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Purpose – The purpose of this paper is to examine how firms’ accounting quality affects bank loan contracting in seven emerging markets and whether these relationships are affected by borrowers’ governance standards. Design/methodology/approach – The study sample period is 1999-2007 because the syndicated loan market was severely affected by the East Asian financial crisis of 1998 and the US financial crisis of 2008. The final sample includes 719 loan observations for 75 firms in seven emerging markets. Findings – The authors find that syndicated lenders provide loans with more favorable terms such as larger amounts, longer maturity and lower interest spread to borrowers in emerging markets with higher accounting quality. The authors also find that the influences of accounting quality on syndicated loan contracting for borrowers in emerging markets exist only with higher country- and firm-level governance rankings. The results of this paper suggest that lenders place more value on accounting numbers generated by borrowers in emerging markets with stronger internal and country governance frameworks. Originality/value – Overall, this research provides new insights about how accounting quality affects the contract design. Specifically, the extant literature has demonstrated the effects of accounting quality on financial contracts in developed countries (e.g. Bharath et al., 2008). The authors extend this analysis to borrowers in emerging markets and confirm a similar result. Most notably, the authors explore whether the relationship between accounting quality and syndicated loan contracts is influenced by borrowers’ country- and firm-level governance, and find that accounting quality matters only when accompanied by high-quality governance. This research provides new insights about how accounting quality and governance standards affect the terms of borrowing contracts in emerging markets.

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Day, Judy F., Paul R. Mather, and Peter Taylor. "The effect of corporate board characteristics on loan monitoring decisions." Corporate Ownership and Control 11, no. 2 (2014): 46–59. http://dx.doi.org/10.22495/cocv11i2p4.

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Motivated by a paucity of research into the impact of corporate governance from a debtholder perspective, we examine the impact of corporate governance on loan monitoring decisions. The active and close involvement of a major UK bank facilitated the development of extremely realistic experimental scenarios with a great deal of accurate institutional detail. The results show that the likelihood of loan officers increasing the level of monitoring in the context of a debt covenant breach is associated with board independence, director financial expertise and the presence of a blockholder. A two-way interaction between financial expertise and board independence is also documented. Since likelihood of debt covenant breaches continues to be an important variable in studies of accounting choice and corporate finance the paper provides insights into associated debt contracting costs and their determinants. Apart from extending the academic literature, this study provides additional evidence on the efficacy of good corporate governance in reducing debt contracting costs that should also be of interest to regulators and practitioners

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Ge, Wenxia, Jeong-Bon Kim, and Byron Y. Song. "Internal governance, legal institutions and bank loan contracting around the world." Journal of Corporate Finance 18, no. 3 (June 2012): 413–32. http://dx.doi.org/10.1016/j.jcorpfin.2012.01.006.

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Chong, Dazhi, Hui Shi, Liuliu(Luna) Fu, Hao Ji, and Gongjun Yan. "The impact of XBRL on information asymmetry: evidence from loan contracting." Journal of Management Analytics 4, no. 2 (April 3, 2017): 145–58. http://dx.doi.org/10.1080/23270012.2017.1299047.

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BALL, RYAN, ROBERT M. BUSHMAN, and FLORIN P. VASVARI. "The Debt-Contracting Value of Accounting Information and Loan Syndicate Structure." Journal of Accounting Research 46, no. 2 (May 2008): 247–87. http://dx.doi.org/10.1111/j.1475-679x.2008.00273.x.

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Minetti, Raoul, and Sung-Guan Yun. "Institutions, Bailout Policies, and Bank Loan Contracting: Evidence from Korean Chaebols." Review of Finance 19, no. 6 (January 6, 2015): 2223–75. http://dx.doi.org/10.1093/rof/rfu053.

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39

Kim, Jeong-Bon, Byron Y. Song, and Yue Zhang. "Earnings performance of major customers and bank loan contracting with suppliers." Journal of Banking & Finance 59 (October 2015): 384–98. http://dx.doi.org/10.1016/j.jbankfin.2015.06.020.

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40

Chan, Lilian H., Kevin C. W. Chen, and Tai-Yuan Chen. "The effects of firm-initiated clawback provisions on bank loan contracting." Journal of Financial Economics 110, no. 3 (December 2013): 659–79. http://dx.doi.org/10.1016/j.jfineco.2013.08.010.

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41

Ding, Libo, Bangyi Li, and Suling Feng. "Research on Multiprincipals Selecting Effective Agency Mode in the Student Loan System." Mathematical Problems in Engineering 2014 (2014): 1–8. http://dx.doi.org/10.1155/2014/835254.

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An effective agency mode is the key to solve incentive problems in Chinese student loan system. Principal-agent frameworks are considered in which two principals share one common agent that is performing one single task but each prefers the different aspect of the task. Three models are built and decision mechanisms are given. The studies show that the three modes have different effects. Exclusive dealing mode is not good for long-term effect because sometimes it guides agent ignoring repayment. If effort proportionality coefficient and observability are both unchanged, principals all prefer common agency, but independent contracting mode may be more efficient in reality because not only the total outputs under that mode are larger than those under cooperation one, but also preferring independent contracting mode can stimulate the bank participating in the game.

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Aivazian, Varouj A., Jiaping Qiu, and Mohammad M. Rahaman. "Bank loan contracting and corporate diversification: Does organizational structure matter to lenders?" Journal of Financial Intermediation 24, no. 2 (April 2015): 252–82. http://dx.doi.org/10.1016/j.jfi.2015.02.002.

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43

Paik, Daniel Gyung, Timothy Hamilton, Brandon Byunghwan Lee, and Sung Wook Yoon. "Loan purpose and accounting based debt covenants." Review of Accounting and Finance 18, no. 2 (May 13, 2019): 321–43. http://dx.doi.org/10.1108/raf-10-2017-0194.

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Purpose The purpose of this paper is to investigate the association between the purpose of a loan and the type of debt covenants, separated into balance sheet-based and income statement-based covenants. Design/methodology/approach Using private loan deal observations obtained from the DealScan database over the period between 1996 and 2013, the authors classify the sample loan deals into three categories based on the purpose of borrowing, namely, borrowings for corporate daily operating purposes, financing purposes and acquisition and investing purposes. The authors conduct multinomial logistic regression analysis to test the relationship between the choice of financial ratios in a debt covenant and the purpose of a loan, controlling for financing constraints and other factors that have been identified as important to debt covenant analysis in prior studies. Findings The results provide evidence that the purpose of the loan is significantly associated with the type of debt covenants, suggesting that the lender and the borrower have considered the loan purpose when structuring their debt agreements. More specifically, the results indicate that the loans borrowed to fund acquisitions or long-term investment projects are more likely to have income statement-based covenants and less likely to have balance sheet-based covenants. In contrast, the loans borrowed for corporate daily operating purposes or financing purposes are more likely to contain balance sheet-based covenants relative to income statement-based covenants. Research limitations/implications The authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency. The results are limited to the US market with its institutional structure. In future studies, it would be interesting to perform similar investigations on firms in other countries. Practical implications The findings contain important and economically significant implications indicating that loan lenders and borrowers agree to include different types of accounting information (that is, income statement- versus balance sheet-based financial ratios) in their loan covenants for different purpose loans. Social implications Overall, the results provide important evidence regarding the connection between debt covenant structure and loan purpose. In doing so, it contributes to the literature on debt contract design (Dichev and Skinner 2002; Chava and Roberts 2008; Demerjian 2011; Christensen and Nikolaev 2012). Despite much interest in debt contract design, Skinner (2011) argues that there still exists incomplete knowledge of the economic factors that structure debt contracts. Income statement-based covenants depend on measures of profitability and efficiency and act as trip wires that transfer control rights to lenders when borrowing firms’ performance deteriorates. On the other hand, balance sheet-based covenants rely on information about sources and uses of capital and align interests between borrowing firms and lenders by restricting the borrower’s capital structure. The authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency. Originality/value This study is the first to identify differences in trends over time for the use of income statement- and balance sheet-based covenants as it relates to different loan purposes. The authors build on prior research to examine the degree to which loan purpose is associated with the choice between income statement-based and balance sheet-based covenants.

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BEATTY, ANNE. "Discussion of The Debt-Contracting Value of Accounting Information and Loan Syndicate Structure." Journal of Accounting Research 46, no. 2 (May 2008): 289–95. http://dx.doi.org/10.1111/j.1475-679x.2008.00274.x.

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Giner, Begoña, and Araceli Mora. "Bank loan loss accounting and its contracting effects: the new expected loss models." Accounting and Business Research 49, no. 6 (May 8, 2019): 726–52. http://dx.doi.org/10.1080/00014788.2019.1609898.

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Ramadhan, Chesa, and Adimas Rakyandani Saksono. "Proportionality Principle on Online Lending Contract in Indonesia." Notaire 2, no. 1 (July 22, 2019): 19. http://dx.doi.org/10.20473/ntr.v2i1.12986.

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AbstractOnline lending is form of alternative funding resulted from financial technology innovation. Until February 2019 there are 99 financial technology corporations that engaged in lending activity that operated officially, legally, and recognized by Otoritas Jasa Keuangan. However, many problems arise form this innovation in form of online lending. Many consumers became the victims of either illegal or even legal online lending platforms. Started from the paramount loan interest applied in the online lending agreement until the amount of loan that need to be paid did not in accordance to the initial amount of debt, become core of the problems for the online lending consumers that treated unfair and unjustly by the online lending platform organizer. Moreover, online lending contract commonly belonged to the standard clause agreement that have been pre-arranged by one of the contracting parties. This research has purpose to determine the urgency of application of the proportionality principle on online lending contract. This research using doctrinal research method followed by conceptual and statute approaches. This research expected to generates conclusion on the notions of application of proportionality principle on online lending contract that included as standard clause contract in order to distribute contracting parties’ rights and obligations proportionally. Therefore, in future the online lending agreement could generate justice and proportional contract for contracting parties and the substance of the contract can reflect this proportionality principle.

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Gong, Guojin, and Shuqing Luo. "Lenders' Experience with Borrowers' Major Customers and the Debt Contracting Demand for Accounting Conservatism." Accounting Review 93, no. 5 (January 1, 2018): 187–222. http://dx.doi.org/10.2308/accr-52022.

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ABSTRACT Lenders often have lending relationships with borrowers' major customers (labeled as “supply-chain lenders”). We hypothesize that private information obtained from borrowers' major customers can facilitate more timely and precise evaluation of borrowers' creditworthiness; this potentially reduces supply-chain lenders' reliance on accounting conservatism in debt contracting. Consistently, we find that suppliers borrowing from supply-chain lenders provide less conservative financial statements than suppliers borrowing from non-supply-chain lenders at loan origination. This finding is more pronounced when supply-chain lenders are likely to have greater information advantage over non-supply-chain lenders. Based on latent factors that proxy for private information accessible from customers, we find that supply-chain lenders' information advantage relates to customers' future operational and financial risks. Further, in lending agreements, supply-chain lenders accept fewer accounting-based contractual terms, lower spreads, and longer loan maturity than non-supply-chain lenders. The overall evidence suggests that borrowers' major customers represent an important information channel that enables lenders to more effectively screen and monitor borrowers, thus weakening the debt contracting demand for accounting conservatism.

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Mamonov, M. E. "Hidden “holes” in the capital of banks and the supply of credit to the real sector of economy." Voprosy Ekonomiki, no. 5 (May 28, 2018): 49–68. http://dx.doi.org/10.32609/0042-8736-2018-5-49-68.

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Our analysis documents that the existence of hidden “holes” in the capital of not yet failed banks - while creating intertemporal pressure on the actual level of capital - leads to changing of maturity of loans supplied rather than to contracting of their volume. Long-term loans decrease, whereas short-term loans rise - and, what is most remarkably, by approximately the same amounts. Standardly, the higher the maturity of loans the higher the credit risk and, thus, the more loan loss reserves (LLP) banks are forced to create, increasing the pressure on capital. Banks that already hide “holes” in the capital, but have not yet faced with license withdrawal, must possess strong incentives to shorten the maturity of supplied loans. On the one hand, it raises the turnovers of LLP and facilitates the flexibility of capital management; on the other hand, it allows increasing the speed of shifting of attracted deposits to loans to related parties in domestic or foreign jurisdictions. This enlarges the potential size of ex post revealed “hole” in the capital and, therefore, allows us to assume that not every loan might be viewed as a good for the economy: excessive short-term and insufficient long-term loans can produce the source for future losses.

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Gopalakrishnan, Balagopal, Sanket Mohapatra, and David McMillan. "The effects of reporting standards and information sharing on loan contracting: Cross-country evidence." Cogent Economics & Finance 8, no. 1 (January 1, 2020): 1716920. http://dx.doi.org/10.1080/23322039.2020.1716920.

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Kim, Jeong-Bon, Judy S. L. Tsui, and Cheong H. Yi. "The voluntary adoption of International Financial Reporting Standards and loan contracting around the world." Review of Accounting Studies 16, no. 4 (May 12, 2011): 779–811. http://dx.doi.org/10.1007/s11142-011-9148-5.

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Journal articles on the topic 'Loan contracting'

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