Village banks and other financial institutions often have very simple contracts that seem to rule out some transactions on an ad hoc basis. In one Thai village bank, for example, all loans must be in multiples of one thousand baht. If you want to borrow 1,500 baht, you are out of luck. All of the loans that this bank makes must be repaid on December 31, and the same amount must be repaid regard...

This paper deals with loan contracting from a private bank in Vietnam. We focus on the main loan contract features that the bank uses in lending to business firms, namely loan maturity, collateral and loan interest rate. Based upon the simultaneous equation model of Dennis et al. (2000) and the bank’s loan contracting policies, we examine the possible interdependency of the three different loan...

We investigated how a borrower’s adverse environmental, social, and governance incidents affect bank loan contracts. Using sample of 2001 publicly traded US firms during the period from 2007 to 2016, we found that loans initiated after occurrence firm’s or governance-related incident have significantly higher spread lower size. Our contained covered by RepRisk, as RepRisk began tracking firms’ ...

We investigate how borrowers’ corporate governance influences bank loan contracting terms in emerging markets and how this relation varies across countries with different country-level governance. We find that borrowers with stronger corporate governance obtain favorable contracting terms with respect to loan amount, maturity, collateral requirements, and spread. Firm-level and country-level co...

A multi–agent, moral–hazard model is used to analyze how to regulate compensation of bank employees below a CEO in order to limit bank risk. Unlike in the single–agent model, pay for performance does not necessarily create risk. If employee returns are uncorrelated, pay is irrelevant for risk. If returns are correlated, a low wage can indicate risk. If correlation is endogenous, relative–perfor...

This paper examines the effects of strategic alliances on non-financial firms’ bank loan financing. We construct several measures to capture firms’ alliance activities using the frequency of alliance activities, the prominence of the alliance partner and the relative networking position in the overall alliance network. We find that firms with active alliance involvement experience a lower cost ...

In stark contrast to bank debt contracts, most micro-finance contracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro-finance practitioners argue that he fiscal discipline imposed by freq...

My results suggest that the primary role of performance pricing in bank debt contracts is to delay costly renegotiation. This effect is concentrated in long-term loans, indicating that the renegotiation reduction benefits of pricing grids are larger for long maturities. For instance, a five-year loan with a pricing grid is refinanced for pricing-related reasons on average a year later than a si...