The effect of bank monitoring on public bond terms

• 成果类型: Article
• 署名作者: Ma, Zhiming; Stice, Derrald; Williams, Christopher
• 署名单位: Peking University; Hong Kong University of Science & Technology; University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.02.003
• 发表日期: 2019
• 页码: 379-396
• 关键词: Debt contracting; Public bonds; Private loans; Bank monitoring

摘要

This study examines the effect of bank loan monitoring on public bond contract design. We find that bond yield spreads are lower and that bond issuance amounts are larger when a borrower has recently obtained a private loan, consistent with bond issuers benefiting from the screening and ongoing monitoring of banks. We find that these bonds include more covenants than bonds issued without the cross-monitoring of banks, consistent with bondholders wanting to protect themselves from private lenders. This effect is larger for firms with high information asymmetry and larger potential conflicts between different lender types. Our results are robust to a battery of sensitivity tests. Overall, our empirical results suggest that borrowers that precede their public bond issuances with private loan agreements receive more favorable bond terms. Meanwhile, these benefits are associated with the cost of increased monitoring by public bonds. (C) 2019 Elsevier B.V. All rights reserved.