Corporate boards and bank loan contracting

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Title: Corporate boards and bank loan contracting
Author: Francis, Bill ; Hasan, Iftekhar ; Wu, Qiang ; Koetter, Michael
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 14/2012
Year of publication: 2012
Publication date: 11.4.2012
Published in: Published in Journal of Financial Research, Volume 35, Issue 4, December 2012: 521-552
Pages: 49 s.
Keywords: informaatio; pankkitekniikka; pankkitoiminta; sopimukset; riskit; yritykset; luotot; kustannukset; vaikutukset; johtajat; hallinto; johtaminen; johtokunnat
JEL: G21; G34
Abstract: We investigate the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and nonprice loan terms (e.g., interest rates, collateral, covenants, and performance-pricing provisions) are more favorable, and syndicated loans comprise more lenders. In addition, board size, audit committee structure, and other board characteristics influence bank loan prices. However, they do not consistently affect all nonprice loan terms except for audit committee independence. Our study provides strong evidence that banks tend to recognize the benefits of board monitoring in mitigating information risk ex ante and controlling agency risk ex post, and they reward higher quality boards with more favorable loan contract terms. JEL Classification: G21, G34
Note: Ilmestynyt myös Journal of financial research 35 ; 4 ; 2012.

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