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  • April–May 2021
  • Article

The Influence of Loan Officers on Loan Contract Design and Performance
By: Robert Bushman, Janet Gao, Xiumin Martin and Joseph Pacelli
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...  View Details
Keywords: Loan Officers; Covenants; Interest Spreads; Syndicated Loans; Banks and Banking; Financing and Loans; Design; Performance
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  • Article

CDS Trading and Nonrelationship Lending Dynamics
By: Jung Koo Kang, Christopher Williams and Regina Wittenberg-Moerman
We investigate how credit default swaps (CDSs) affect lenders’ incentives to initiate new lending relationships. We predict that CDSs reduce adverse selection that nonrelationship lead arrangers face when competing for loans. Consistently, we find that a loan is...  View Details
Keywords: Credit Default Swaps; CDS Market; Non-relationship Lending; Debt Contracts; Adverse Selection; Lending Monitoring; Cross-selling
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  • October 2020
  • Article

Corporate Legal Structure and Bank Loan Spread
By: Anywhere (Siko) Sikochi
This study examines how a corporate legal structure may affect borrowing costs. Corporate legal structure refers to the legal fragmentation of a firm into multiple, separately incorporated entities. This fragmentation is bound to be a factor when lenders determine the...  View Details
Keywords: Corporate Legal Structure; Subsidiaries; Bank Loans; Minority Interest; Credit Risk; Organizational Structure; Business Subsidiaries; Financing and Loans
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  • 2020
  • Working Paper

Weak Credit Covenants
By: Victoria Ivashina and Boris Vallée
Using novel data on 1,240 credit agreements, we investigate sources of contractual complexity in the leveraged loan market. While negative covenants are widespread, carve-out and deductible clauses that weaken them are as frequent. We propose simple measures of...  View Details
Keywords: Loan Contracts; Debt Covenants; Creditor Governance; Credit; Agreements and Arrangements; Leveraged Buyouts
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  • 2018
  • Working Paper

Large Banks and Small Firm Lending
By: Vitaly Bord, Victoria Ivashina and Ryan D. Taliaferro
We show that since 2007, there was a large and persistent shift in the composition of lenders to small firms. Large banks impacted by the real estate prices collapse systematically contracted their credit to all small firms throughout the United States. However,...  View Details
Keywords: Banks and Banking; Financing and Loans; Small Business; Financial Crisis
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  • Working Paper

Covenant-Light Contracts and Creditor Coordination
By: Bo Becker and Victoria Ivashina
In 2015, 70% of newly issued leveraged loans had weaker enforcement features, called covenant-light or "cov-lite"; this is nearly a three-time increase in cov-lite issuance compared to a previous peak in 2007. We evaluate whether this development can be attributed to...  View Details
Keywords: Credit Cycles; Loan Contracts; Debt Covenants; Contracts; Financing and Loans; Credit; Borrowing and Debt
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  • April 2015
  • Article

Incentivizing Calculated Risk-Taking: Evidence from an Experiment with Commercial Bank Loan Officers
By: Shawn Cole, Martin Kanz and Leora Klapper
This paper uses a series of experiments with commercial bank loan officers to test the effect of performance incentives on risk assessment and lending decisions. We first show that while high-powered incentives lead to greater screening effort and more profitable...  View Details
Keywords: Banking; Management Processes; Credit Products; Experimental Economics; Risk Management; Motivation and Incentives; Management Practices and Processes; Financing and Loans; Banking Industry
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  • March 2014
  • Article

Cyclicality of Credit Supply: Firm Level Evidence
By: Bo Becker and Victoria Ivashina
Theory predicts that there is a close link between bank credit supply and the evolution of the business cycle. Yet fluctuations in bank-loan supply have been hard to quantify in the time series. While loan issuance falls in recessions, it is not clear if this is due to...  View Details
Keywords: Business Cycles; Borrowing and Debt; Credit; Banks and Banking; Bonds; Financial Markets; Financing and Loans; Banking Industry
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  • Article

Liability Structure in Small-Scale Finance
By: Fenella Carpena, Shawn Cole, Jeremy Shapiro and Bilal Zia
Microfinance, the provision of small individual and business loans, has experienced dramatic growth, reaching over 150 million borrowers worldwide. Much of the success of microfinance has been attributed to attempts to overcome the challenges of information asymmetries...  View Details
Keywords: Microfinance; Emerging Markets; Financial Markets; Legal Liability; Banks and Banking; Banking Industry; India
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  • November 2012 (Revised July 2013)
  • Case

Gerry Pasciucco at AIG Financial Products
By: Gautam Mukunda and Thomas J. DeLong
Gerry Pasciucco was appointed to lead American International Group's Financial Products (AIGFP) group after the government bailout of AIG in 2008 and charged with the task of shutting down the division while minimizing the government's losses. AIGFP's failed trades had...  View Details
Keywords: Corporate Accountability; Ethics; Crisis Management; Financial Crisis; Management Teams; Business and Government Relations; Financial Services Industry; United States
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  • October 2012
  • Case

Harrah's Entertainment
By: Paul A. Gompers, Kristin Mugford and J. Daniel Kim
This case examines the issues of establishing and managing a capital structure for the leveraged buyout of Harrah's Entertainment.  View Details
Keywords: Leveraged Buyouts; Debt Markets; Loan Contracts; Covenants; Casinos; Gaming; Private Equity; Entertainment and Recreation Industry; United States
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  • Article

Employee Selection as a Control System
By: Dennis Campbell
Theories from the economics, management control, and organizational behavior literatures predict that when it is difficult to align incentives by contracting on output, aligning preferences via employee selection may provide a useful alternative. This study...  View Details
Keywords: Management Systems; Governance Controls; Employees; Selection and Staffing; Motivation and Incentives; Decision Making; Business Model
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  • September 2011 (Revised September 2011)
  • Case

Penn Warranty Corporation
By: Richard S. Ruback and Royce Yudkoff
Penn Warranty Corporation sold warranty contracts to the used car market. During the recession in 2008/2009 Penn's sales declined by 26% Instead of growing by 11% as forecasted. Also, disruptions in financial and insurance markets created a cash shortfall. In the...  View Details
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  • September 2010
  • Article

Bank Lending During the Financial Crisis of 2008
By: Victoria Ivashina and David S. Scharfstein
This paper documents that new loans to large borrowers fell by 47% during the peak period of the financial crisis (fourth quarter of 2008) relative to the prior quarter and by 79% relative to the peak of the credit boom (second quarter of 2007). New lending for real...  View Details
Keywords: Financial Liquidity; Financing and Loans; Credit; Borrowing and Debt; Financial Crisis; Banking Industry
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  • August 2010
  • Teaching Note

Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V.: Valuing Ships (TN)
By: Benjamin C. Esty and Albert W. Sheen
Teaching Note for 210058.  View Details
Keywords: Valuation; Economic Slowdown and Stagnation; Financial Crisis; Price; Financing and Loans; Contracts; Asset Pricing; Cash Flow; Management Analysis, Tools, and Techniques; Shipping Industry; Germany
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  • 2010
  • Working Paper

Employee Selection as a Control System
By: Dennis Campbell
Theories from the economics, management control, and organizational behavior literatures predict that when it is difficult to align incentives by contracting on output, aligning preferences via employee selection may provide a useful alternative. This study...  View Details
Keywords: Accounting; Decision Making; Governance Controls; Employees; Selection and Staffing; Management Systems; Financial Services Industry
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  • July 2010 (Revised August 2021)
  • Supplement

Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships (CW)
By: Benjamin C. Esty and Albert W. Sheen
After booming for more than five years, the global shipping (maritime) industry experienced a dramatic crash in late 2008 as the global financial system froze and the global economy slid into recession. Ship charter rates (revenue) fell by as much as 90% causing prices...  View Details
Keywords: Fair Value Accounting; Economic Slowdown and Stagnation; Capital Markets; Cash Flow; Financial Liquidity; Banks and Banking; Price; Price Bubble; Contracts; Crisis Management; Market Transactions; Valuation; Shipping Industry
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  • June 2010 (Revised August 2021)
  • Case

Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships
By: Benjamin C. Esty and Albert Sheen
After booming for more than five years, the global shipping (maritime) industry experienced a dramatic crash in late 2008 as the global financial system froze and the global economy slid into recession. Ship charter rates (revenue) fell by as much as 90% causing prices...  View Details
Keywords: Fair Value Accounting; Financial Crisis; Capital Markets; Financial Liquidity; International Finance; Globalized Markets and Industries; Valuation; Banking Industry; Shipping Industry; Germany
Related
  • 2011
  • Working Paper

Cyclicality of Credit Supply: Firm Level Evidence
By: Bo Becker and Victoria Ivashina
Theory predicts that there is a close link between bank credit supply and the evolution of the business cycle. Yet fluctuations in bank-loan supply have been hard to quantify in the time-series. While loan issuance falls in recessions, it is not clear if this is due to...  View Details
Keywords: Business Cycles; Borrowing and Debt; Credit; Banks and Banking; Bonds; Financial Markets; Financing and Loans; Banking Industry
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  • August 2007
  • Teaching Note

Creditor Activism in Sovereign Debt: "Vulture" Tactics or Market Backbone (TN)
By: Laura Alfaro and Ingrid Vogel
Teaching Note to 706057.  View Details
Keywords: Borrowing and Debt; Financing and Loans; Bonds; Contracts; Investment Activism
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