The Supply-Side Determinants of Loan Contract Strictness

• 成果类型: Article
• 署名作者: Murfin, Justin
• 署名单位: Yale University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2012.01767.x
• 发表日期: 2012
• 页码: 1565-1601
• 关键词: LENDING RELATIONSHIPS; capital structure; monetary-policy; Debt covenants; credit; banking; CHOICE; MARKET; BEHAVIOR; shocks

摘要

Using a measure of contract strictness based on the probability of a covenant violation, I investigate how lender-specific shocks impact the strictness of the loan contract that a borrower receives. Banks write tighter contracts than their peers after suffering payment defaults to their own loan portfolios, even when defaulting borrowers are in different industries and geographic regions from the current borrower. The effects persist after controlling for bank capitalization, although bank equity compression is also associated with tighter contracts. The evidence suggests that recent defaults inform the lenders perception of its own screening ability, thereby impacting its contracting behavior.