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Do Bank Characteristics Influence Loan Contract Terms?

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Author Info
Anthony D.F. Coleman () (Australian Prudential Regulation Authority)
Neil Esho () (Australian Prudential Regulation Authority)
Ian G. Sharpe () (Australian Prudential Regulation Authority)

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Abstract

This paper examines the impact of bank characteristics on loan pricing and maturity. Controlling for borrower characteristics and other loan contract features, we find that bank monitoring ability, bargaining power, risk and syndicate structure significantly affect the setting of loan maturity and pricing. Higher risk banks and banks with greater bargaining power lend for significantly shorter maturities and at higher yield spreads, while banks with greater monitoring capabilities lend for longer maturities and charge a higher yield spread. Consistent with the avoidance of duplication of monitoring expenses, larger banking syndicates lend for longer maturities, but due to a decline in contractual flexibility and monitoring, lend at lower yield spreads.

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File URL: http://www.apra.gov.au/RePEc/RePEcDocs/Archive/working_papers/wp0008.pdf
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Publisher Info
Paper provided by Australian Prudential Regulation Authority in its series Working Papers with number wp0008.

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Date of creation: 01 Feb 2002
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Handle: RePEc:apr:aprewp:wp0008

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  1. Berger, Allen N. & Rosen, Richard J. & Udell, Gregory F., 2005. "Does Market Size Structure Affect Competition? The Case of Small Business Lending," CEI Working Paper Series 2005-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
    Other versions:
  2. Casolaro, Luca & Focarelli, Dario & Pozzolo, Alberto Franco, 2003. "The Pricing Effect of Certification on Bank Loans: Evidence from the Syndicated Credit Market," Economics & Statistics Discussion Papers esdp03010, University of Molise, Dept. SEGeS. [Downloadable!]
    Other versions:
  3. Gabriel Jiménez & Jose A. Lopez & Jesús Saurina, 2007. "Empirical analysis of corporate credit lines," Working Paper Series 2007-14, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  4. Yener Altunbaş & Alper Kara & David Marqués-Ibáñez, 2009. "Large debt financing: syndicated loans versus corporate bonds," Working Paper Series 1028, European Central Bank. [Downloadable!]
  5. Pierre-Richard Agénor & Koray Alper & Luiz Pereira da Silva, 2009. "Capital Requirements and Business Cycles with Credit Market Imperfections," Centre for Growth and Business Cycle Research Discussion Paper Series 124, Economics, The Univeristy of Manchester. [Downloadable!]
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