Does Information Technology Reputation Affect Bank Loan Terms?

36 Pages Posted: 14 Jan 2014

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

City University of Hong Kong

Byron Song

Hong Kong Baptist University (HKBU) – Department of Accountancy and Law

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance

Date Written: January 13, 2014

Abstract

The aim of this study is to provide a systematic analysis of the effect of information technology (IT) reputation (i.e., the accumulation of public recognition of the quality of a firm’s IT capability) on bank loan contracting. More specifically, we are interested in the effect of IT reputation on the interest rate charged, collateral requirement, covenants, and number of lenders in syndicated loans. To study the effect of IT reputation on loan contracts, we analyzed 4,145 loan facility-years for borrowers with superior IT reputation in the year before the loan versus borrowers with no IT reputation. Our results indicate that firms that have appeared five consecutive years in the prestigious annual Information week 500 list of America’s most IT innovative firms, a proxy for superior IT reputation, are more likely to be charged a lower interest rate, face less covenant restrictions, and have a have a higher number of participating banks in their loans.

Keywords: Information technology (IT), IT capability reputation, bank loans, loan spread, collateral, debt covenant, syndicate structure

JEL Classification: G3, G21, L14

Suggested Citation

Kim, Jeong-Bon and Song, Byron and Stratopoulos, Theophanis C., Does Information Technology Reputation Affect Bank Loan Terms? (January 13, 2014). 2014 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=2378484 or http://dx.doi.org/10.2139/ssrn.2378484

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Byron Song

Hong Kong Baptist University (HKBU) – Department of Accountancy and Law ( email )

Hong Kong

Theophanis C. Stratopoulos (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 x35943 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
254
Abstract Views
1,676
rank
119,454
PlumX Metrics