Internal governance, legal institutions and bank loan contracting around the world
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 413-432 |
| Journal / Publication | Journal of Corporate Finance |
| Volume | 18 |
| Issue number | 3 |
| Publication status | Published - Jun 2012 |
Link(s)
Abstract
Using a sample of non-U.S. firms 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 favorable effect of firm-level governance on some loan contracting terms is 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 factor that mitigates agency and information risk, and that country-level legal institutions and firm-level governance mechanisms complement each other in influencing loan contracting terms. © 2012 Elsevier B.V.
Research Area(s)
- Corporate governance, Legal enforcement, Legal origin, Loan contracting
Citation Format(s)
Internal governance, legal institutions and bank loan contracting around the world. / Ge, Wenxia; Kim, Jeong-Bon; Song, Byron Y.
In: Journal of Corporate Finance, Vol. 18, No. 3, 06.2012, p. 413-432.Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
