Shareholder Rights and Non-Price Loan Contract Terms

45 Pages Posted: 18 Aug 2021 Last revised: 29 Sep 2021

See all articles by Yunhui Han

Yunhui Han

University of Utah - David Eccles School of Business

Date Written: July 28, 2017

Abstract

This paper analyzes the impact of shareholder rights on non-price loan contract terms. Using a large sample of syndicated loans borrowed by U.S. firms between 1991 and 2006, I find that stronger shareholder rights significantly enhance the stringency of loan contract design. The likelihood of having collateral significantly increases with the strength of shareholder rights. Loan maturity of firms with the strongest shareholder rights is 13.1% shorter. The loan size of the same borrowing firms is 8.4% smaller. These results are robust to different proxies of shareholder rights and are robust to the instrumental variable approach controlling for simultaneous determination of loan contract terms, such as collateral and maturity. This study complements the existing literature on the impact of shareholder rights on loan pricing and has important implications for understanding the impact of companies’ governance structure on loan contract design.

Keywords: Agency problems; Loan contract design; Corporate governance

JEL Classification: G10, G21, G30

Suggested Citation

Han, Yunhui, Shareholder Rights and Non-Price Loan Contract Terms (July 28, 2017). Available at SSRN: https://ssrn.com/abstract=3895378 or http://dx.doi.org/10.2139/ssrn.3895378

Yunhui Han (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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