Do Bank Characteristics Influence Loan Contract Terms?
Anthony D.F. Coleman
Ian G. Sharpe
This paper examines the impact of bank characteristics on loan pricing and maturity. Controlling for borrower characteristics and other loan contract features, we find that bank monitoring ability, bargaining power, risk and syndicate structure significantly affect the setting of loan maturity and pricing. Higher risk banks and banks with greater bargaining power lend for significantly shorter maturities and at higher yield spreads, while banks with greater monitoring capabilities lend for longer maturities and charge a higher yield spread. Consistent with the avoidance of duplication of monitoring expenses, larger banking syndicates lend for longer maturities, but due to a decline in contractual flexibility and monitoring, lend at lower yield spreads.
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