Performance pricing in bank debt contracts

• 成果类型: Article
• 署名作者: Asquith, P; Beatty, A; Weber, J
• 署名单位: University System of Ohio; Ohio State University; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2004.09.005
• 发表日期: 2005
• 关键词: risk

摘要

Performance pricing links bank debt interest rate spreads to a borrower's performance via two options. Interest-decreasing performance pricing reduces spreads if credit quality improves. It is more common when prepayment is more likely or costly and when adverse selection costs are higher, and is less common when multiple performance measures better predict credit quality. Interest- increasing performance pricing increases spreads if credit quality deteriorates. It is more common when lenders reduce interest rates to add this provision, when downgrades are more likely, and when moral hazard costs are higher. We find lower spreads for contracts with interest increasing performance pricing. (c) 2005 Elsevier B.V. All rights reserved.