Corporate Loan Securitization and the Standardization of Financial Covenants

Bozanic, Zahn; Loumioti, Maria; Vasvari, Florin P.

doi:10.2139/ssrn.2846703

Cited by 7 publications

(6 citation statements)

References 34 publications

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“…In addition, we proxy for a bank's screening effort upon origination and presume that screening incentives are weaker for loans securitized upon origination, relative to loans that a bank securitizes following origination, that is, after retaining loan ownership at least for some time (Bozanic, Loumioti, and Vasvari []). We proxy for the time to securitization using the ratio of the loan balance outstanding upon securitization to the original loan amount ( Securitized loan amount ), with lower values indicating a longer time period up to a loan's securitization.…”

Section: Variable Definitions and Summary Statisticsmentioning

confidence: 99%

Enhancing Loan Quality Through Transparency: Evidence from the European Central Bank Loan Level Reporting Initiative

Ertan

Loumioti²,

Wittenberg-Moerman

2017

J of Accounting Research

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We explore whether transparency in banks’ securitization activities enhances loan quality. We take advantage of a novel disclosure initiative introduced by the European Central Bank, which requires, as of January 2013, banks that use their asset‐backed securities as collateral for repo financing to report securitized loan characteristics and performance in a standardized format. We find that securitized loans originated under the transparency regime are of better quality with a lower default probability, a lower delinquent amount, fewer days in delinquency, and lower losses upon default. Additionally, banks with more intensive loan level information collection and those operating under stronger market discipline experience greater improvement in their loan quality under the new reporting standards. Overall, we demonstrate that greater transparency has real effects by incentivizing banks to improve their credit practices.

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Section: Variable Definitions and Summary Statisticsmentioning

confidence: 99%

Enhancing Loan Quality Through Transparency: Evidence from the European Central Bank Loan Level Reporting Initiative

Ertan

Loumioti²,

Wittenberg-Moerman

2017

J of Accounting Research

Self Cite

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“…The duration between the launch date and the date when the loan becomes available for borrowers (syndication duration) reflects the degree of information asymmetry between borrowers and lenders, and between lead and participating lenders (Ivashina and Sun 2011). 8 Bozanic, Loumioti, and Vasvari (2015) find that standardization of accounting numbers in loan agreements reduces loan syndication duration. We argue that accounting comparability, by enabling relatively less informed participating lenders to learn from their experience with other borrowers in similar situations, has the potential to lessen the information asymmetry between them and more informed lenders.…”

Section: Loan Syndication Processmentioning

confidence: 99%

Financial Statement Comparability and Debt Contracting: Evidence from the Syndicated Loan Market

Fang

Xin

et al. 2016

Accounting Horizons

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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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“…Through the interaction in the syndication process and other related services like underwriting, lead banks, compared to other participants, have better information and access to secondary markets. As a result, they can easily sell parts of their shares to the CLO in the syndicate (Benmelech et al, 2012;Blickle et al, 2020;Bord and Santos, 2015;Bozanic et al, 2018;Drucker and Puri, 2009;Guo and Zhang, 2020;Paligorova and Santos, 2016).…”

Section: Banks' Management Of Transition Risk and Trump's Electionmentioning

confidence: 99%

The Color of Corporate Loan Securitization

Mueller

Nguyen

2022

SSRN Journal

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Corporate Loan Securitization and the Standardization of Financial Covenants

Abstract: Corporate loan securitization and the standardization of financial covenants.

Cited by 7 publications

References 34 publications

Enhancing Loan Quality Through Transparency: Evidence from the European Central Bank Loan Level Reporting Initiative

Enhancing Loan Quality Through Transparency: Evidence from the European Central Bank Loan Level Reporting Initiative

Financial Statement Comparability and Debt Contracting: Evidence from the Syndicated Loan Market

The Color of Corporate Loan Securitization

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