Abstract

http://ssrn.com/abstract=1732364
 
 

References (50)



 
 

Citations (6)



 


 



The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting


Michael R. Roberts


The Wharton School - University of Pennsylvania; National Bureau of Economic Research (NBER)

August 27, 2012

7th Annual Conference on Empirical Legal Studies Paper

Abstract:     
Using hand-collected data from SEC filings, we show that bank loans are repeatedly renegotiated in order to modify contractual constraints designed to mitigate information related problems. The typical loan is renegotiated every eight months, or four times during the life of the contract. The financial health of the contracting parties, the uncertainty of the borrower’s credit quality, and the purpose of the renegotiation govern the timing of these renegotiations. However, the relative importance of these factors depends critically on when in the relationship the renegotiation occurs. This temporal dependence reflects a decline in information asymmetry during the lending relationship such that lenders can write more efficient contracts and rely more heavily on observable signals of borrower credit quality when amending the contracts.

Number of Pages in PDF File: 57

Keywords: Contract Renegotiation, Asymmetric Information, Bank Loans, Financial Contracting

JEL Classification: G21, G32, L14, K12

working papers series


Download This Paper

Date posted: December 31, 2010 ; Last revised: September 17, 2012

Suggested Citation

Roberts, Michael R., The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting (August 27, 2012). 7th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=1732364 or http://dx.doi.org/10.2139/ssrn.1732364

Contact Information

Michael R. Roberts (Contact Author)
The Wharton School - University of Pennsylvania; National Bureau of Economic Research (NBER) ( email )
3620 Locust Walk, #2320
Philadelphia, PA 19104-6365
United States
(215) 573-9780 (Phone)
HOME PAGE: http://finance.wharton.upenn.edu/~mrrobert/
Feedback to SSRN


Paper statistics
Abstract Views: 2,992
Downloads: 769
Download Rank: 16,670
References:  50
Citations:  6

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.281 seconds