In recent years international comparisons emphasized the importance of institutional and legal factors in capital market development and the performance of private firms. Here that approach is applied to the pricing of bank loans. Loan rates depend on contract parameters such as risk, the existence of covenants and loan size. Syndicate structure and the number of lenders also determine the cost of borrowing. Loan prices are also negatively impacted if the lending banks operate as part of larger conglomerates. Loan prices are also shown to depend on a number of institutional factors, such as the quality of protection of creditor rights and the quality of law enforcement. Curiously, we find that contracts with customers in "French tradition" countries were priced lower, as if having lower risk, than others, other things held equal. This is not in line with other segments of the literature on international capital market differences and institutional factors. It suggests that differences across legal traditions are more complicated than previously understood
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Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number
22-2007.
Length: 25 pages Date of creation: Mar 2007 Date of revision: Handle: RePEc:icr:wpicer:22-2007
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"Do Institutions Cause Growth?,"
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[Downloadable!]
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Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004.
"Do Institutions Cause Growth?,"
NBER Working Papers
10568, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
"Government Ownership of Banks,"
Journal of Finance,
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La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"Government Ownership of Banks,"
Working Paper Series
rwp01-016, Harvard University, John F. Kennedy School of Government.
[Downloadable!]
Rafael La Porta & Florencio Lopezde-Silanes & Andrei Shleifer, 2000.
"Government Ownership of Banks,"
NBER Working Papers
7620, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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