Private benefits of control and bank loan contracts
Lin, Chih-Yung; Tsai, Wei-Che; Hasan, Iftekhar; Tuan, Le Quoc (31.01.2018)
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Volyymi
49Numero
April 2018
2018
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201803231389Tiivistelmä
This paper investigates whether or not private benefits of control by managers and large shareholders influence the financing cost of firms. Evidence shows that lending banks demand a significantly higher loan spread, higher fees, shorter loan maturity, smaller loan size, stricter covenants, and greater collateral on firms with greater private benefits of control. Results are stronger for firms with weak corporate governance quality, supporting the agency cost viewpoint. Such evidence implies that banks consider higher private benefits of control as a type of agency problem when they make lending decisions.