The Loan Covenant Channel: How Bank Health Transmits to the Real Economy

• 成果类型: Article
• 署名作者: Chodorow-Reich, Gabriel; Falato, Antonio
• 署名单位: Harvard University; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13074
• 发表日期: 2022
• 页码: 85-128
• 关键词: regression discontinuity designs; firm-level evidence; Control rights; incomplete contracts; INVESTMENT; RENEGOTIATION; constraints; INFORMATION; management; CRISIS

摘要

We document the importance of covenant violations in transmitting bank health to nonfinancial firms. Roughly one-third of loans in our supervisory data breach a covenant during the 2008 to 2009 period, allowing lenders to force a renegotiation of loan terms or to accelerate repayment of otherwise long-term credit. Lenders in worse health are more likely to force a reduction in the loan commitment following a violation. The reduction in credit to borrowers who violate a covenant can account for the majority of the cross-sectional variation in credit supply during the 2008 to 2009 crisis.