Internal Governance, Legal Institutions and Bank Loan Contracting around the World

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Detail(s)

Original languageEnglish
Publication statusPublished - 26 May 2011

Conference

Title2011 Annual Conference of Canadian Academic Accounting Association
PlaceCanada
CityToronto
Period26 - 29 May 2011

Abstract

Using a sample of non-U.S. borrowers from 22 countries during 2003–2007, we examine the effect of firm-level governance on various features of loan contracting in the international loan market. We find that banks charge lower loan rates, offer larger and longer-maturity loans and impose fewer restrictive covenants to better-governed firms. We also find that the favourable effect of firm-level governance on some loan contracting terms are stronger in countries with strong legal institutions than in countries with weak legal institutions. Our results suggest that banks view a borrower’s internal governance as a mitigating factor for agency and information risk, and that country-level legal institutions and firm-level governance mechanisms complement each other in influencing loan contracting terms.

Citation Format(s)

Internal Governance, Legal Institutions and Bank Loan Contracting around the World. / Ge, Wenxia; KIM, Jeong Bon; Song, Byron Y.

2011. Paper presented at 2011 Annual Conference of Canadian Academic Accounting Association, Toronto, Canada.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review