Foreign Lenders’ adoption of performance pricing provisions in syndicated loans

Lee, Edward; Pappas, Kostas; Xu, Alice

doi:10.1016/j.jbankfin.2020.105869

Cited by 4 publications

(2 citation statements)

References 72 publications

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“…In addition, De Haas and Van Horen (2013) state that the location of a bank to the borrower's country plays a significant role in the lending decision. Lee et al (2020) investigates the use of performance pricing provisions (PPPs) in syndicated loan contracts by foreign lenders. The study finds that foreign lenders prefer PPPs over tight covenants due to higher information asymmetry and greater renegotiation costs than their domestic counterparts.…”

Section: Extant Research and Hypothesesmentioning

confidence: 99%

Cross-Border Lending and the Importance of Timely Loss Recognition

Ahmed

2024

المجلة العلمية للدراسات والبحوث المالية والتجارية

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Objective: This study investigates the impact of a firm's financial reporting quality on foreign lenders' participation in loan offerings. Design and Methodology:The study examines syndicated loan data and analyzes whether timely loss recognition, a measure of financial reporting conservatism, influences foreign lenders' decision to participate in a loan syndicate. The study also considers the role of "soft" information and lender proximity to the borrower country. Findings and Recommendations:The results show that foreign lenders prefer borrowers with reliable accounting information and timely loss recognition. Such recognition reduces information asymmetry and allows foreign lenders to rely more on public financial reports. Timely loss recognition is even more important for foreign lenders facing informational disadvantages due to geographical distance. The findings suggest that firms can attract more foreign lending by improving financial reporting quality and recognizing losses in a timely manner. Originality and Value:This study contributes to the literature by providing insights into the factors influencing foreign lenders' lending decisions. The results highlight the importance of financial reporting quality and loss recognition timeliness in mitigating information asymmetry in cross-border lending. The findings have implications for policymakers and firms seeking foreign financing.

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Section: Extant Research and Hypothesesmentioning

confidence: 99%

Cross-Border Lending and the Importance of Timely Loss Recognition

Ahmed

2024

المجلة العلمية للدراسات والبحوث المالية والتجارية

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“…Foreign lead percentage is calculated as the number of foreign lead lenders divided by the total number of lead lenders. Because our regressions explicitly control for industry‐ and year‐fixed effects, we do not expect the industry year median foreign lead percentage to directly affect the interest rate of the current loan (Hollander & Verriest, 2016; Lee, Pappas, & Xu, 2020).…”

Section: Empirical Findingsmentioning

confidence: 99%

Do foreign lenders' national cultures affect loan pricing?

Pappas

2021

Int. J Fin Econ

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We examine the role of foreign lenders' national cultures in the pricing of syndicated loans. Using Schwartz's cultural dimensions, embeddedness, and mastery, we find that foreign lenders domiciled in countries with higher embeddedness and mastery scores offer lower interest rates. These findings are robust to a battery of robustness tests and incremental to the effects of formal institutions. We also document that greater information asymmetry and foreign lenders' bargaining powers strengthen the impact of the foreign lenders' cultural values on loan pricing. An additional analysis shows that the intensity of loan covenants is also negatively related to the embeddedness and mastery scores of the foreign lenders' countries of domicile. Our findings suggest that cross-border debt contracting decisions are not only determined by objective judgments about risk and return but also depend on the subjective assertion of values and beliefs guided by informal institutions, such as cultural norms. Cultural values can nurture and shape economic incentives and perceptions of sophisticated professional bankers in increasingly globalized market settings, even when the financial stakes are substantial.

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The effect of lenders’ dual holding on loan contract design: Evidence from performance pricing provisions

Lim

2022

Journal of Banking & Finance

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Foreign Lenders’ adoption of performance pricing provisions in syndicated loans

Cited by 4 publications

References 72 publications

Cross-Border Lending and the Importance of Timely Loss Recognition

Cross-Border Lending and the Importance of Timely Loss Recognition

Do foreign lenders' national cultures affect loan pricing?

The effect of lenders’ dual holding on loan contract design: Evidence from performance pricing provisions

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