Can CFOs improve enterprise loan bargaining power? An empirical analysis based on CFO characteristics

The bargaining space between borrowers and lenders in negotiating loan prices has expanded with the deepening of China's interest rate marketisation reform. This study constructs a bargaining game model to examine the intrinsic mechanism through which chief financial officers (CFOs) affect corporate loan bargaining power. A two-tier stochastic frontier model is adopted to measure borrowers’ and lenders’ loan bargaining power, and the relationship between CFOs' background, internal part-time jobs, tenure, gender, educational characteristics, and corporate loan bargaining power is empirically investigated using data from Chinese listed companies from 2008 to 2022. Regarding the findings, first, the negotiation bargaining power of enterprises is weaker than that of lenders, leading to the negotiated loan price being higher than the ‘fair’ price, and pushing up the financing cost of enterprises to a certain extent. Second, CFOs can reduce enterprises’ loan negotiation costs by broadening enterprises’ financing channels and improving negotiation efficiency, thereby enhancing their loan negotiation power. Third, CFOs with experience in the financial industry or those who are also CEOs can enhance their corporate loan bargaining power; however, their tenure, gender, and education do not affect corporate loan bargaining power. This study expands the research on the impact of CFOs on corporate financing costs and factors affecting loan prices. The results provide a reference point for enterprises when selecting CFOs to enhance their bargaining power for loans and reduce their financing costs.