Bank Loan Terms and Conditions: Is There a Macro Effect?
Research in International Business and Finance, Vol. 37, 2016, pp. 269-282
Posted: 22 Feb 2016
Date Written: January 1, 2016
We examine whether macroeconomic factors contain significant information for bank loan contracting terms and conditions (T&Cs), over and above that of standard firm-specific or country-level institutional factors. Our estimation is based on a seemingly unrelated mixed processes methodology that accommodates two salient data properties: (i) the fact that loan contract terms are determined jointly as a single lending contract, and (ii) the fact that the elements of loan T&Cs are generated by different distributional formats. Our findings indicate that cross-country variation accounts for a significant portion of observed variation in loan T&Cs. In addition, macroeconomic fundamentals significantly explain the “package” of loan T&Cs offered to corporate borrowers, with this effect being distinct from any influence that T&Cs receive from firm-specific factors, and also from country-specific institutional factors.
Keywords: Bank lending, Loan pricing, Loan terms and conditions, Macroeconomic effects
JEL Classification: G21, G32, E43, M41
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