Internal governance, legal institutions and bank loan contracting around the world

Corporate Governance and Downside Systematic Risk with a Moderating Role of Socio-Political in Pakistan

“…John and Senbet (1998) argued that corporate governance mechanism empowers the stakeholders to exercise necessary control over the management for maximizing their return on investment. Most of previous studies observed that corporate governance not only improves the firm performance (Bai, Liu, Lu, Song, & Zhang, 2004;Erkens, Hung, & Matos, 2012) but also increases the shareholders' wealth (Ammann, Oesch, & Schmid, 2011;Cremers & Nair, 2005;Ge, Kim, & Song, 2012). Moreover, the emergence of risk management concerns has induced the researchers to explore the relationship of corporate governance and firm risk.…”

How Regulation Affects the Relevance of Bank-Debt Maturity as a Control Mechanism in Developed Countries

“…Qian and Strahan (2007) and Bae and Goyal (2009) observe that stronger creditor protection reduces the cost of borrowing and increases the maturity of bank loans. Ge et al (2012) argue that the effect of firm-level governance on bank debt contracting is asymmetric, depending on how well the investors' rights are protected. Typicaly, the investors' rights in market-oriented countries are better protected than in bank-based countries as a result of stronger law enforcement.…”

“…Consequently, when the introduction of regulation improves the firm-level governance systems and their transparency, firms will adjust their capital structures in using less short-term bank debt as a governance devise to solve the agency problems caused by growth opportunities. Then, since such adjustment is contingent on the institutional environment, banks offer longer-maturity loans with fewer restrictive covenants and lower interest rates to firms in countries with better regulatory systems (Ge et al 2012).…”

“…Bank debt requires lower cost to inform financial markets and it gives managers more flexibility than public debt. Ge et al (2012) find that corporate governance quality and legal framework condition bank financing. Then, our paper presents evidence that the implementation of legislation, hard law, which promotes transparency in countries with different legal systems, aligns the role of bank debt maturity in addressing asymmetric information and agency problems.…”

Trade credit and bank credit as alternative governance structures in South Africa: evidence from banking sector development

“…Banks view the firm's internal corporate governance systems and structures as an important factor that mitigates agency and information risk. W. Ge et al (2012) found that legal institutions within an economy and firm-level governance mechanisms help each other in influencing bank credit agreements.…”