Agency Cost of CEO Perquisite in the Bank Loan Contracts

53 Pages Posted: 25 Jan 2017

See all articles by Chia-Ying Chan

Chia-Ying Chan

Yuan-Ze University - Department of Finance

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Chih-Yung Lin

National Chiao-Tung University

Date Written: August 20, 2016

Abstract

This study investigates whether CEO perquisite of borrowing firms plays any significant role, both in terms of price and non-price settings, in financial contracts and reveals that lending banks demand significantly higher return (spread), more collateral, and stricter covenants from firms with higher CEO perks. These results hold after adjusting for CEO attributes, compensation schemes, and corporate governance of the borrowing firm. Therefore this study draws the conclusion that banks consider CEO perquisite as one type of agency cost when they make the lending decisions.

Keywords: CEO perquisite; agency cost; loan spread; compensation schemes; corporate governance

JEL Classification: G21, G32, G34

Suggested Citation

Chan, Chia-Ying and Hasan, Iftekhar and Lin, Chih-Yung, Agency Cost of CEO Perquisite in the Bank Loan Contracts (August 20, 2016). Gabelli School of Business, Fordham University Research Paper No. 2905736. Available at SSRN: https://ssrn.com/abstract=2905736 or http://dx.doi.org/10.2139/ssrn.2905736

Chia-Ying Chan

Yuan-Ze University - Department of Finance ( email )

320 Chungli
Taiwan

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Chih-Yung Lin (Contact Author)

National Chiao-Tung University ( email )

Taiwan

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
77
Abstract Views
491
rank
333,180
PlumX Metrics