Abstract
Loan contract terms refer to the price and nonprice terms associated with a corporate loan deal between a borrower and a lender or a syndicate of lenders. The specification of loan contract terms differs across loans. These differences are attributable to the tradeoffs between values of loan contract terms that the borrower chooses when negotiating the loan contract, as well as the purpose of the loan and borrower and lending syndicate characteristics. Methodological issues that arise when investigating the relations between loan contract terms include allowing for loan contract terms that are determined simultaneously and accurately estimating credit risk.
Keywords
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Allen, L. and Peristiani, S. (2004). “Conflicts of interest in merger advisory services.” Working Paper, Baruch College, May.
Arzac, E.R., Schwartz, R.A., and Whitcomb, D.K. (1981). “A theory and test of credit rationing: some further results.” American Economic Review, 71: 735–777.
Asquith, P., Beatty, A., and Weber, J. (2002). “Performance pricing in debt contracts.” Working Paper, Penn State University and MIT.
Azzi, C.F., and Cox, J.C. (1976). “A theory and test of credit rationing: comment.” American Economic Review, 66: 911–917.
Barnea, A., Haugen, R., and Senbet, L. (1980). “A rationale for debt maturity structure and call provisions in an agency theoretic framework.” Journal of Finance, 35: 1223–1234.
Beatty, A., Dichev, I.D., and Weber, J. (2002). “The role and characteristics of accounting-based performance pricing in private debt contracts.” Working Paper, Penn State University, University of Michigan, and MIT.
Beck, T., Demirguc-Kunt, A., and Maksimovic, V. (2004). “Bank competition and access to finance: international evidence.” Journal of Money, Credit, and Banking, 36: 627–649.
Berger, A.N. and Hannan, T.H. (1989). “The price–concentration relationship in banking.” The Review of Economics and Statistics, 71: 291–299.
Berger, A.N. and Udell, G.F. (1990). “Collateral, loan quality and bank risk.” Journal of Monetary Economics, 25: 21–42.
Berger, A.N. and Udell, G.F. (1995). “Relationship lending and lines of credit in small firm finance.” Journal of Business, 68: 351–381.
Besanko, D. and Thakor, A.V. (1987). “Collateral and rationing: sorting equilibria in monopolistic and competitive credit markets.” International Economic Review, 28: 671–690.
Bester, H. (1985). “Screening vs. rationing in credit markets with imperfect information.” American Economic Review, 57: 850–855.
Bester, H. (1987). “The role of collateral in credit markets with imperfect information.” European Economic Review, 31: 887–899.
Bester, H. (1994). “The role of collateral in a model of debt renegotiation.” Journal of Money, Credit, and Banking, 26: 72–86.
Bhattcharya, S. and Chiesa, G. (1995). “Proprietary information, financial intermediation, and research incentives.” Journal of Financial Intermediation, 4: 328–357.
Bolton, P. and Scharfstein, D. (1996). “Optimal debt structure and the number of creditors.” Journal of Political Economy, 104: 1–25.
Boot, A.W. (2000). “Relationship banking: what do we know?” Journal of Financial Intermediation, 9: 7–25.
Boot, A.W. and Thakor, A.V. (2000). “Can relationship banking survive competition?” Journal of Finance, 55: 679–713.
Boot, A.W., Thakor, A.V., and Udell, G.F. (1991). “Collateralized lending and default risk: equilibrium analysis, policy implications and empirical results.” Economic Journal, 101: 458–472.
Carey, M., Post, M., and Sharpe, S.A. (1998). “Does corporate lending by banks and finance companies differ? Evidence on specialization in private debt contracting.” Journal of Finance, 53: 845–878.
Chan, Y. and Kanatas, G. (1985). “Asymmetric valuations and the role of collateral in loan agreements.” Journal of Money, Credit, and Banking, 17: 84–95.
Coco, G. (1999). “Collateral and heterogeneity in risk attitudes and credit market equilibrium”. European Economic Review, 43: 559–574.
Coleman, A.D.F., Esho, N., and Sharpe, I.G. (2002). “Do bank characteristics influence loan contract terms.” Australian Prudential Regulation Authority Working Paper.
Covitz, D. and Heitfield, E. (1999). “Monitoring, moral hazard, and market power: a model of bank lending.” Finance and Economics Discussion Series 37, Board of Governors of the Federal Reserve System.
Degryse, H. and Ongena, S. (2001). “Bank relationships and firm profitability.” Financial Management, 30: 9–34.
Dennis, S.A. and Mullineaux, D.J. (2000). “Syndicated loans.” Journal of Financial Intermediation, 9: 404–426.
Dennis, S., Nandy, D., and Sharpe, I.G. (2000). “The determinants of contract terms in bank revolving credit agreements.” Journal of Financial and Quantitative Analysis, 35: 87–110.
Detragiache, E., Garella, P.G., and Guiso, L. (2000). “Multiple versus single banking relationships, theory and evidence.” Journal of Finance, 55: 1133–1161.
Doyle, J.T. (2003). “Credit risk measurement and pricing in performance pricing-based debt contracts.” Working Paper, University of Michigan.
Esty, B. and Megginson, W. (2003). “Creditor rights, enforcement, and debt ownership structure: evidence from the global syndicated loan market.” Journal of Financial and Quantitative Analysis, 38(1): 37–59.
Flannery, M. (1986). “Asymmetric information and risky debt maturity choice.” Journal of Finance, 41: 18–38.
Gottesman, A.A. and Roberts, G.S. (2004). “Maturity and corporate loan pricing.” Financial Review, 38: 55–77.
Gottesman, A.A. and Roberts, G.S. (2005). “Loan rates and collateral.” Working Paper, York University.
Guedes, J. and Opler, T. (1996). “The determinants of the maturity of new corporate debt issues.” Journal of Finance, 51: 1809–1833.
Hannan, T.H. (1997). “Market share inequality, the number of competitors, and the HHI: an examination of bank pricing.” Review of Industrial Organization, 12: 23–35.
Harhoff, D. and Korting, T. (1998). “Lending relationships in Germany: empirical evidence from survey data.” Journal of Banking and Finance, 22: 1317–1353.
Helwege, J. and Turner, C.M. (1999). “The slope of the credit yield curve for speculative-grade issuers.” Journal of Finance, 54: 1869–1884.
Hester, D.D. (1979). “Customer relationships and terms of loans: evidence from a pilot survey.” Journal of Money, Credit, and Banking, 11: 349–357.
John, K., Lynch, A.W., and Puri, M. (2003). “Credit ratings, collateral and loan characteristics: implications for yield.” Journal of Business, 76(3): 371–410.(July).[0]
Jones, J., Lang, W., and Nigro, P. (2000). “Recent trends in bank loan syndications: evidence for 1995 to 1999.” Working Paper, Office of the Controller of the Currency.
Kale, J. and Noe, T.H. (1990). “Risky debt maturity choice in a sequential game equilibrium.” Journal of Financial Research, 13: 155–166.
Koskela, E. (1983). “Credit rationing and non-price loan terms.” Journal of Banking and Finance, 7: 405–416.
Lee, S.W. and Mullineaux, D.J. (2001). “The size and composition of commercial lending syndicates.” Working Paper, University of Kentucky.
Melnik, A. and Plaut, S. (1986). “Loan commitment contracts, terms of lending, and credit allocation.” Journal of Finance, 41: 425–435.
Merton, R.C. (1974). “On the pricing of corporate debt: the risk structure of interest rates.” Journal of Finance, 29: 449–470.
Myers, S. (1977). “The determinants of corporate borrowing.” Journal of Financial Economics, 5: 147–176.
Panyagometh, K., Roberts, G.S., and Gottesman, A.A. (2004). “The relation between performance pricing covenants and corporate loan spreads.” Working Paper, York University.
Peterson, M.A. and Rajan, R.G. (1995). “The effect of credit market competition on lending relationships.” Quarterly Journal of Economics, 110: 403–444.
Pozzolo, A.F. (2002). “Collateralized lending and borrowers’ riskiness.” Working Paper, Banca d’ Italia.
Rajan, R.G. (1992). “Insiders and outsiders: the choice between informed and arm’s-length debt.” Journal of Finance, 47: 1367–1400.
Saunders, A. and Allen, L. (2002). Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, 2nd edition., New York: John Wiley and & Sons.
Standard and Poor’s. (2004). “Corporate defaults in 2003 recede from recent highs.” Standard and Poor’s, January.
Strahan, P.E. (1999). “Borrower risk and the price and nonprice terms of bank loans.” Working Paper, Federal Reserve Bank of New York.
Treacy, W.F. and Carey, M.S. (1998). “Credit risk rating at large US banks.” Federal Reserve Board Bulletin, (November): 897–921.
von Thadden, E.L. (1992). “The commitment of finance, duplicated monitoring, and the investment horizon.” ESF-CEPR Working Paper No. 27 in Financial Markets, 27 London.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer Science+Business Media New York
About this entry
Cite this entry
Gottesman, A.A. (2013). Loan Contract Terms. In: Lee, CF., Lee, A. (eds) Encyclopedia of Finance. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-5360-4_15
Download citation
DOI: https://doi.org/10.1007/978-1-4614-5360-4_15
Published:
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4614-5359-8
Online ISBN: 978-1-4614-5360-4
eBook Packages: Business and Economics