The effect of bond market transparency on bank loan contracting*

• 成果类型: Article
• 署名作者: Chy, Mahfuz; Kyung, Hoyoun
• 署名单位: University of Missouri System; University of Missouri Columbia
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101536
• 发表日期: 2023
• 关键词: Information asymmetry; corporate governance; earnings management; Maturity Structure; real activities; Credit ratings; Debt maturity; INVESTMENT; CHOICE; IMPACT

摘要

We find that bond issuers receive bank loans with 12% fewer covenants when the sec-ondary corporate bond market becomes more transparent. The treatment effect is more pronounced when bond trades are more informative, when stock prices are less infor-mative, and when the likelihood of future debt-equity agency conflicts is higher. The ev-idence suggests that bond prices reflect forward-looking information that mitigates banks' information risk in debt contracting. As such, banks impose fewer contractual restrictions on bond issuers when bond transactions become publicly observable. We find consistent results using a hand-collected dataset of negative covenants. Treatment firms are also less likely to subsequently renegotiate borrowing terms. Finally, we find corroborating evi-dence from new primary bond issues. Taken together, our findings suggest that public bond market frictions affect private debt contract design. (c) 2022 Elsevier B.V. All rights reserved.