Do Capital Asset and Labor Conditions Matter in Loan Pricing? Evidence From Capital and Labor Redeployability

Yangyang Chen; Jeffrey Ng; Chong Wang

doi:10.1177/0148558X241244842

Do Capital Asset and Labor Conditions Matter in Loan Pricing? Evidence From Capital and Labor Redeployability

Yangyang Chen
, Jeffrey Ng
, Chong Wang^*

^*Corresponding author for this work

Department of Accountancy

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

2 Citations (Scopus)

Abstract

This article offers the novel insight that loan pricing is affected by the redeployability of borrowers’ capital assets and labor. We find that both capital and labor redeployability are negatively related to loan spread, suggesting that borrowers with higher redeployability enjoy more favorable loan pricing. This finding is consistent with redeployability promoting reduced cost stickiness and enhanced liquidity, which in turn reduces borrowers’ probability of default and lenders’ loan losses given default. Our cross-sectional test results reveal that the relation between redeployability and loan pricing is stronger for firms with more growth opportunities, which is consistent with lenders viewing redeployability as an important way to minimize potential loan losses from risky investments. Also, the relation between redeployability and loan pricing is weaker for loans with more stringent nonpricing terms, suggesting that strict terms may protect lenders and make redeployability less important in loan pricing. © The Author(s) 2024.

Original language	English
Pages (from-to)	1409-1452
Number of pages	44
Journal	Journal of Accounting, Auditing & Finance
Volume	40
Issue number	4
Online published	6 May 2024
DOIs	https://doi.org/10.1177/0148558X241244842
Publication status	Published - Oct 2025

Bibliographical note

Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Research Keywords

capital redeployability
labor redeployability
loan pricing
cost stickiness
liquidity

Access Output

10.1177/0148558X241244842

Other Access Options

Check CityUHK Library

Permanent Link

Right click to copy link

Cite this

@article{296f68639b01494388c5071cbe35ada5,

title = "Do Capital Asset and Labor Conditions Matter in Loan Pricing? Evidence From Capital and Labor Redeployability",

abstract = "This article offers the novel insight that loan pricing is affected by the redeployability of borrowers{\textquoteright} capital assets and labor. We find that both capital and labor redeployability are negatively related to loan spread, suggesting that borrowers with higher redeployability enjoy more favorable loan pricing. This finding is consistent with redeployability promoting reduced cost stickiness and enhanced liquidity, which in turn reduces borrowers{\textquoteright} probability of default and lenders{\textquoteright} loan losses given default. Our cross-sectional test results reveal that the relation between redeployability and loan pricing is stronger for firms with more growth opportunities, which is consistent with lenders viewing redeployability as an important way to minimize potential loan losses from risky investments. Also, the relation between redeployability and loan pricing is weaker for loans with more stringent nonpricing terms, suggesting that strict terms may protect lenders and make redeployability less important in loan pricing. {\textcopyright} The Author(s) 2024.",

keywords = "capital redeployability, labor redeployability, loan pricing, cost stickiness, liquidity",

author = "Yangyang Chen and Jeffrey Ng and Chong Wang",

note = "Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).",

year = "2025",

month = oct,

doi = "10.1177/0148558X241244842",

language = "English",

volume = "40",

pages = "1409--1452",

journal = "Journal of Accounting, Auditing \& Finance",

issn = "0148-558X",

publisher = "Sage Publications",

number = "4",

}

TY - JOUR

T1 - Do Capital Asset and Labor Conditions Matter in Loan Pricing? Evidence From Capital and Labor Redeployability

AU - Chen, Yangyang

AU - Ng, Jeffrey

AU - Wang, Chong

N1 - Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).

PY - 2025/10

Y1 - 2025/10

N2 - This article offers the novel insight that loan pricing is affected by the redeployability of borrowers’ capital assets and labor. We find that both capital and labor redeployability are negatively related to loan spread, suggesting that borrowers with higher redeployability enjoy more favorable loan pricing. This finding is consistent with redeployability promoting reduced cost stickiness and enhanced liquidity, which in turn reduces borrowers’ probability of default and lenders’ loan losses given default. Our cross-sectional test results reveal that the relation between redeployability and loan pricing is stronger for firms with more growth opportunities, which is consistent with lenders viewing redeployability as an important way to minimize potential loan losses from risky investments. Also, the relation between redeployability and loan pricing is weaker for loans with more stringent nonpricing terms, suggesting that strict terms may protect lenders and make redeployability less important in loan pricing. © The Author(s) 2024.

AB - This article offers the novel insight that loan pricing is affected by the redeployability of borrowers’ capital assets and labor. We find that both capital and labor redeployability are negatively related to loan spread, suggesting that borrowers with higher redeployability enjoy more favorable loan pricing. This finding is consistent with redeployability promoting reduced cost stickiness and enhanced liquidity, which in turn reduces borrowers’ probability of default and lenders’ loan losses given default. Our cross-sectional test results reveal that the relation between redeployability and loan pricing is stronger for firms with more growth opportunities, which is consistent with lenders viewing redeployability as an important way to minimize potential loan losses from risky investments. Also, the relation between redeployability and loan pricing is weaker for loans with more stringent nonpricing terms, suggesting that strict terms may protect lenders and make redeployability less important in loan pricing. © The Author(s) 2024.

KW - capital redeployability

KW - labor redeployability

KW - loan pricing

KW - cost stickiness

KW - liquidity

UR - https://www.scopus.com/pages/publications/85192366975

UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85192366975&origin=recordpage

U2 - 10.1177/0148558X241244842

DO - 10.1177/0148558X241244842

M3 - RGC 21 - Publication in refereed journal

SN - 0148-558X

VL - 40

SP - 1409

EP - 1452

JO - Journal of Accounting, Auditing & Finance

JF - Journal of Accounting, Auditing & Finance

IS - 4

ER -

Do Capital Asset and Labor Conditions Matter in Loan Pricing? Evidence From Capital and Labor Redeployability

Abstract

Bibliographical note

Funding

Research Keywords

Access Output

Other Access Options

Permanent Link

Other Files and Links

Fingerprint

Cite this