Lending Relationships and Loan Contract Terms

Bharath, Sreedhar T.; Dahiya, Sandeep; Saunders, Anthony; Srinivasan, Anand

doi:10.2139/ssrn.891150

Cited by 258 publications

(434 citation statements)

References 57 publications

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“…Figure 2 shows that repeated lending reduces interest rates. Bharath et al (2011) found the same relationship, i.e. that repeated lending from the same lender reduces lending rates.…”

Section: Data Measurement and Descriptive Statisticsmentioning

confidence: 68%

The role of demographics in small business loan pricing

Neuberger

Räthke-Döppner

2014

Small Bus Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractTo sustain growth in an aging economy, it is important to ease the financing of small firms by bank loans. Using bank internal data of small business loans in Germany, we examine the determinants of loan rates in the period 1995-2010. Beyond characteristics of the firm, the loan contract, and the lending relationship, demographic aspects matter. However, collateral and relationship lending play a larger role in loan pricing than the entrepreneur's age. Banks do not seem to discriminate older borrowers by higher loan rates. We rather find statistical discrimination of younger borrowers because of their lower wealth. Single entrepreneurs obtain cheaper loans than married ones. Firms in peripheral regions with low population density are disadvantaged by higher loan rates compared to those in agglomerated regions.JEL classification: D14, E43, G21, J14, L26

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“…Figure 2 shows that repeated lending reduces interest rates. Bharath et al (2011) found the same relationship, i.e. that repeated lending from the same lender reduces lending rates.…”

Section: Data Measurement and Descriptive Statisticsmentioning

confidence: 68%

The role of demographics in small business loan pricing

Neuberger

Räthke-Döppner

2014

Small Bus Econ

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“…Results are consistent with those in the baseline regression; the coefficient on INTERPOL SOCIAL CAPITAL is both negative and significant. Bharath, Dahiya, Saunders, and Srinivasan (2011) find that a prior borrowing-lending relationship reduces loan spreads when the firm engages the same bank in another loan transaction. In our study, the social capital measure captures both social norms and social networks, and the social network component is more likely to reflect the overall environmental connections of the firm with local communities instead of the connection between borrowers and lenders.…”

Section: Other Robustness Checksmentioning

confidence: 89%

Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds

Hasan

Hoi

et al. 2017

J. Financ. Quant. Anal.

438

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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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“…Much of the literature on the cost of bank debt (e.g., Graham et al (2008), Bharath, Dahiya, Saunders, and Srinivasan (2011)) uses the loan spread over LI-BOR at the time of the loan origination as a measure of the cost of bank debt. The AIS DRAWN variable in the Loan Pricing Corporation's (LPC) DealScan database describes the amount a borrower pays in basis points over LIBOR for each dollar drawn down.…”

Section: Cost Of Bank Loansmentioning

confidence: 99%

Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

Ertugrul¹,

Jin²,

Qiu³

et al. 2017

J. Financ. Quant. Anal.

419

239

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This paper investigates the impact of a firm's annual report readability and ambiguous tone on its borrowing costs. We find that firms with larger 10-K file sizes and a higher proportion of uncertain and weak modal words in 10-Ks have stricter loan contract terms and greater future stock price crash risk. Our results suggest that the readability and tone ambiguity of a firm's financial disclosures are related to managerial information hoarding. Shareholders of firms with less readable and more ambiguous annual reports not only suffer from less transparent information disclosure but also bear the increased cost of external financing.

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Lending Relationships and Loan Contract Terms

Cited by 258 publications

References 57 publications

The role of demographics in small business loan pricing

The role of demographics in small business loan pricing

Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds

Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

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