Financial Statement Disaggregation and Bank Loan Pricing

51 Pages Posted: 7 Feb 2018 Last revised: 10 Mar 2019

See all articles by Chih-Yung Lin

Chih-Yung Lin

National Chiao-Tung University

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Bin Miao

Hong Kong Polytechnic University

Date Written: January 30, 2018

Abstract

We analyze whether the disaggregation quality (DQ) of a borrower’s financial statement is associated with its bank loan pricing. We find that firms with low DQ have high bank loan spreads and total cost of borrowing. These results are more pronounced for risky and poorly governed firms. Moreover, a low DQ is associated with a high likelihood of requiring collateral, low credit rating, and high bond issuing spreads. Overall, our results suggest that DQ conveys valuable credit quality information to bank loan lenders.

Keywords: disaggregation quality, bank loan spread, total cost of borrowing, disclosure quality, default risk

JEL Classification: G21, G24, G32, M41

Suggested Citation

Lin, Chih-Yung and Lin, Tse-Chun and Miao, Bin, Financial Statement Disaggregation and Bank Loan Pricing (January 30, 2018). Available at SSRN: https://ssrn.com/abstract=3113170 or http://dx.doi.org/10.2139/ssrn.3113170

Chih-Yung Lin

National Chiao-Tung University ( email )

Taiwan

Tse-Chun Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Bin Miao

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

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