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Publications
Publications
  • April–May 2021
  • Article
  • Journal of Accounting & Economics

The Influence of Loan Officers on Loan Contract Design and Performance

By: Robert Bushman, Janet Gao, Xiumin Martin and Joseph Pacelli
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Abstract

We investigate the extent to which loan officers generate independent, individual effects on the design and performance of syndicated loans. We construct a large database containing the identities of loan officers involved in structuring syndicated loan deals, allowing us to systematically disentangle borrower, bank, and loan officer fixed effects. We find that loan officers have significant influence on interest spreads, loan covenant design, and loan performance. Inclusion of borrower fixed effects increases our power to rule out the alternative that loan officer fixed effects reflect the matching of officers to borrowers based on time-invariant borrower characteristics. We document heterogeneity in loan officers’ influence across loan contract terms, with loan officers exerting stronger influence over covenant package design than over interest spreads, but marginal influence on loan maturity. Lead officers have greater influence than participant officers over covenant package design and loan performance, but less robust differential influence on interest spreads.

Keywords

Loan Officers; Covenants; Interest Spreads; Syndicated Loans; Banks and Banking; Financing and Loans; Design; Performance

Citation

Bushman, Robert, Janet Gao, Xiumin Martin, and Joseph Pacelli. "The Influence of Loan Officers on Loan Contract Design and Performance." Journal of Accounting & Economics 71, nos. 2-3 (April–May 2021).
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About The Author

Joseph Pacelli

Accounting and Management
→More Publications

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More from the Authors
  • Call of Fiduciary Duty: Microsoft Acquires Activision Blizzard By: Jonas Heese and Joseph Pacelli
  • Communicating Corporate Culture in Labor Markets: Evidence from Job Postings By: Joseph Pacelli, Tianshuo Shi and Yuan Zou
  • Bear to Bull: An Analyst’s Journey with Netflix By: Aiyesha Dey, Joseph Pacelli, Jennifer G. Lawson and Tom Quinn
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