Corporate Misconduct and the Cost of Private Debt : Evidence from China
Gu, Xian; Hasan, Iftekhar; Lu, Haitian (15.09.2019)
Tässä tietueessa ei ole tiedostoja, ainoastaan metadata.
JulkaisusarjaComparative Economic Studies
Numero3 ; September
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-202002181108
Using a comprehensive dataset of corporate lawsuits in China, we investigate the implications of corporate misconduct on the cost of private debt. Evidence reveals that firms involved in litigations obtain subsequent loans with stricter pricing terms, 15.1 percent higher loan spreads, than non-litigated borrowers. Strong political connection and repeated relationship help to flatten the sensitivity of loan pricing to litigation. Nonbank financial institutions react in stronger manner to corporate misconduct than traditional banks in pricing loans. Overall, we show that private debt holders care about borrowers’ wrongdoing in the past.