Non-Bank Loans, Corporate Investment, and Firm Performance

Biswas, Swarnava; Ozkan, Neslihan; Yin, Junyang

doi:10.2139/ssrn.3327539

Cited by 3 publications

(3 citation statements)

References 76 publications

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“…We first document detailed descriptive statistics. We find that the capital (equity) ratios are much lower, as expected, for banks at an approximate average of 12% in our sample period, similar to results from Berg and Gider (2016), as compared with non-banks, which have a sample average of approximately 40%, similar to findings from Biswas et al (2019). The transaction values are much higher and increasing over time for non-banks: about 10 times those of the banks.…”

Section: Discussion Of Results and Conclusionsupporting

confidence: 82%

“…Plots in red are for non-banks, and those in blue are for banks. The first plot shows that the equity ratios are much lower, as expected, for banks at approximately an average of 12% (similar to the number reported by Berg and Gider 2016) as compared with non-banks, which have a sample average equity ratios of approximately 40% (similar to the number reported by Biswas et al 2019). The second plot shows that the transaction values are much higher and they are increasing over time for non-banks, approximately 10 times those of the banks, the transaction values of which are stable over time.…”

Section: Descriptive Statisticssupporting

confidence: 82%

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Market Misreaction? Leverage and Mergers and Acquisitions

Krishnan

Yakimenko

2022

JRFM

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Using a large database of U.S. mergers and acquisitions (M&As) announced from 2010 through 2017, we examine the effects of capital ratio (leverage) on the announcement period stock price reaction as well as on longer-term stock returns and performance, for banks, making comparisons with non-banks. We compare announcement period reactions (computed in different ways) for lower (lower than sample median) capitalized banks and non-banks with that for higher capitalized banks and non-banks. We confirm our results using multivariate analyses—after controlling for year and industry fixed effects—and we check the associations of capital ratio with announcement period abnormal returns, longer-term performance, as well as certain bank-specific and non-bank specific performance measures. For banks, we find that a lower capital ratio of acquirers at the time of the announcement of the M&A is significantly associated with negative announcement period abnormal returns. However, for these banks, the longer-run abnormal returns and performance are positive. The opposite is true for non-bank M&A announcements: higher equity ratios (lower leverage) of acquirers as at the time of the announcement is significantly associated with negative announcement period abnormal returns. Yet, for such non-banks, the longer-run abnormal returns and performance are positive. This shows that the market may misreact, on average, to both bank and non-bank M&A announcements based on the acquirer’s leverage at the time of the announcement.

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Section: Discussion Of Results and Conclusionsupporting

confidence: 82%

Section: Descriptive Statisticssupporting

confidence: 82%

Market Misreaction? Leverage and Mergers and Acquisitions

Krishnan

Yakimenko

2022

JRFM

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“…Chernenko, Erel, and Prilmeier (2019) show that nonbank lenders rely less on financial covenants. Biswas, Ozkan, and Yin (2019) confirm this finding, but also document that nonbank lenders make extensive use of covenants restricting capital expenditures. By contrast, the rise in covenant‐lite term loans did apparently not induce a major shift in covenant design, as banks continue to impose traditional covenants in loan packages through credit line facilities (Berlin, Nini, and Yu 2020).…”

Section: Limitationsmentioning

confidence: 77%

Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring?

2020

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Theoretically, bank's loan monitoring activity hinges critically on its capitalization. To proxy for monitoring intensity, we use changes in borrowers' investment following loan covenant violations, when creditors can intervene in the governance of the firm. Exploiting granular bank-firm relationships observed in the syndicated loan market, we document substantial heterogeneity in monitoring across banks and through time. Better capitalized banks are more lenient monitors that intervene less with covenant violators. Importantly, this hands-off approach is associated with improved borrowers' performance. Beyond enhancing financial resilience, regulation that requires banks to hold more capital may thus also mitigate the tightening of credit terms when firms experience shocks.

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Evolution of Debt Financing Toward Less-Regulated Financial Intermediaries in the United States

Erel,

Inozemtsev

2024

J. Financ. Quant. Anal.

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Nonbank lenders have been playing an increasing role in supplying debt, especially after the Great Recession. How important are the distortions in the greater regulation of banks that differentially limit risk-taking across alternative providers of credit? How might the growing role of nonbanks in credit markets affect financial stability? This selective review addresses these questions and discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock. We argue that tighter bank regulation has created incentives for nonbanks to increase their participation in credit markets, a trend that creates concerns about financial stability.

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Non-Bank Loans, Corporate Investment, and Firm Performance

Cited by 3 publications

References 76 publications

Market Misreaction? Leverage and Mergers and Acquisitions

Market Misreaction? Leverage and Mergers and Acquisitions

Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring?

Evolution of Debt Financing Toward Less-Regulated Financial Intermediaries in the United States

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