Search

Using loan-level data covering two-thirds of all corporate loans from U.S. banks, we document that SMEs (i) obtain much shorter maturity credit lines than large firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both credit lines and term loans; (iv) have higher utilization rates in normal times; and (v) pay higher spreads, even conditional on other firm characteristics. We present a theory of loan terms that rationalizes these facts as the equilibrium outcome of a trade-off between commitment and discretion. We test the model's prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID recession. Consistent with the theory, the increase in bank credit in 2020Q1 and 2020Q2 came almost entirely from drawdowns by large firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in drawdown rates by firm size, as we show that large firms also exhibited much higher sensitivity of drawdowns to industry-level measures of exposure to the COVID recession. Finally, we match the bank data to a list of participants in the Paycheck Protection Program (PPP) and show that SME recipients of PPP loans reduced their non-PPP bank borrowing in 2020Q2 by between 53 and 125 percent of the amount of their PPP funds, suggesting that government-sponsored liquidity can overcome private credit constraints.

This paper takes A-share listed companies from 2008 to 2018 as samples, and discusses the relationship between bank background CEO and enterprise short-term loan and long-term investment. It is found that the CEO with banking background can significantly inhibit the short-term loan and long-term investment of enterprises. Compared with the highly market-oriented regions and state-owned enterprises, the CEO with banking background has a more obvious inhibitory effect on short-term loan and long-term investment of enterprises. In this paper additionally, PSM, lag variable and Heckman two-stage model are used for robustness test, and the above conclusions are still valid.

We study how U.S. banks' exposure to the economic fallout due to governments' response to Covid-19 in foreign countries has affected their credit provision to borrowers in the United States. We combine a rarely accessed dataset on U.S. banks' cross-border exposure to borrowers in foreign countries with the most detailed regulatory ("credit registry") data that is available on their U.S.-based lending. We compare the change in the U.S. lending of banks that are more vs. less exposed to the pandemic abroad, during and after the onset of Covid-19 in 2020. We document strong spillover effects: U.S. banks with higher foreign exposures in badly "Covid-19-hit" regions cut their lending in the United States substantially more. This effect is particularly strong for longer-maturity loans and term loans and is robust to controlling for firms’ pandemic exposure.

Purpose: Banking business faces a major challenge with defaults. This may not be practical, as there is no control over the borrower’s financial situation or their intents to repay. However, if the banks get to know the possible defaults ahead of some actionable time frame, with a certain degree of accuracy in such prediction, Banks may apply any a possible risk mitigation strategy to remediate possible defaults. Willingness to repay the debt and the capability to repay the debt are two primary reasons for the loan default. The subject of this paper is to closely monitor the Facebook activities and check if we can predict if the borrower may become a defaulter any soon, by applying the sentiment analysis on Facebook data and use Hidden Markov model to compute the probabilities of the possible default. Approach/Methodology/Design: The loan dataset was used for the borrower details and the Facebook data for all those borrowers were gathered. The data from Facebook posts, likes and shares on a borrower were subjected to sentiment analysis, considering income-related information of spend related information on neutral. Hidden Markov model was applied to the polarized data based on the sequence of the sentiment analysis. Findings: Hidden Markov Model gives the transition probability of state, default or regular, for the observed polarized sentiments from Facebook data for borrowers. Practical Implications: This mechanism can be integrated into the bank's credit risk management system and could help predict the possibility of a borrower becoming a defaulter. This is very much useful where the tenure of the loan is longer. This research paper fills the gap of active monitoring of the credit risk for long term loans, where the financial status of the borrower could change but the lender doesn’t get to know until the borrower stops the repayment., peer-reviewed

We find that corporate loan contracts frequently concentrate control rights with a subset of lenders. Despite the rise in term loans without financial covenants—so-called covenant-lite loans—borrowing firms’ revolving lines of credit almost always retain traditional financial covenants. This split structure gives revolving lenders the exclusive right and ability to monitor and to renegotiate the financial covenants, and we confirm that loans with split control rights are still subject to the discipline of financial covenants. We provide evidence that split control rights are designed to mitigate bargaining frictions that have arisen with the entry of nonbank lenders and became apparent during the financial crisis.

The purpose of this paper is to examine the role of key financial obligation factors on total factor productivity (TFP) for 34 Indian industries for the period 2008 2018 using qualitative and quantitative techniques. Financial obligations are measured by short- and long-term loans, operating expenses and liabilities. The outcome of qualitative techniques does not appear to support the hypothesis that short term and long-term loans, liabilities and operating expenses influence TFP. On the contrary, the evidences arise from quantitative technique appear to suggest that short term loan and operating expenses promote TFP. The study also suggests that complimentaries exist between operating expenses and short-term loan and they together appear to boost productivity.

Based on archival and survey data we show that the maturity of U.S. business loans has been continuously increasing since the mid-1930s when banks invented the term loan. Concurrently, bank innovation first involved the invention of credit analysis and covenant design. Later, bank innovation included the advent of loan sales, increased loan syndications, the opening of the leveraged loan market, and the securitization of loans in collateralized loan obligations. We estimate and calibrate a model of bank innovation to determine the quantitative contribution of bank innovation to economic growth. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

This paper investigates the pricing of bank loans relative to capital market debt. The analysis uses a novel sample of loans matched with bond spreads from the same firm on the same date. After accounting for seniority, lenders earn a large premium relative to the bond‐implied credit spread. In a sample of secured term loans to noninvestment‐grade firms, the average premium is 140 to 170 bps or about half of the all‐in‐drawn spread. This is the first direct evidence of firms' willingness to pay for bank credit and raises questions about the nature of competition in the loan market.

The purpose of this research are : 1. Know the description of the company,s financial performance at PT Mayora Indah, Tbk. 2. To find out what factors caused Mottled financial performance at PT Mayora Indah, Tbk tend to increase. The research was conducted using qualitative, descriptive methods of analysis, methods of trend and inductive methods. The research of the data is qualitative and quantitative data. The data of this research is used secondary data. Data collection is used by the method of documentation. The results of this research can be summed up as follows: 1. Trend quick ratio has increased. Trend in the Debt to asset Ratio has increased. Total Assets Turn over trend has increased. The trend of Return On Assets (ROA), Return On Equity (ROE), the Net Profit Margin (NPM) experienced an increase in the company's financial performance so that it can be said better. 2. The factors that lead to good performance is the business accounts receivable, short term loans, increased sales and inventory. The results of the analysis suggest that PT Mayora Indah, Tbk We recommend you be cautious in doing short term loans. In addition the company should improve the effectiveness of the management of inventory. Should the company optimizes the management of accounts receivable in order to collect the accounts receivable business to the company. We recommend that you keep the company sales activity is stable so that the company obtained more optimal net profit margin.

The present study of Determining optimal solution of short term loan use to maximize net farm return in Jorhat District of Assam was undertaken to examine the possibilities and prospects of increasing net return through optimal allocation of resources under existing financial environment. The study was carried out through collection of data by interview method and linear programming technique was used to develop optimum plans for different farms of the study area. The results of the study brought out that there was a tremendous scope to shift the resource allocation to more revenue generating high value crops. The analysis of the results shows that the farmer’s optimal cropping pattern was sugarcane, pea, potato, cauliflower and cabbage in all the farm groups. The operation wise labour use was also increasing significantly in optimal plan. The results showed that in order to obtain an optimum farm credit farm plan, the short term farm credit were used. The optimum farm credit was reached when the net revenue were maximum in all the farm groups. Credit played an important role in increasing net farm return. The effect of credit on income was inversely related with the size of the farm whereas the credit needs were directly related to the farm size.

We study the transmission channels from central banks’ quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. We find evidence consistent with a “capital structure channel” of monetary policy. The announcement of central bank purchases reduces the bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks with low tier-1 ratios and high nonperforming loans increase lending to private (and profitable) firms, which experience a growth in investment. The credit reallocation increases banks’ risk-taking in corporate credit.

The federal government makes credit for higher education widely available at subsidized prices through its student loan programs. A loan provision that at times has significantly increased the size and volatility of the subsidies is the consolidation option, which allows borrowers to convert floating rate loans to fixed rate loans, often on very favorable terms. The option provides a novel setting in which to study how unsophisticated borrowers respond to financial incentives. We develop a model to evaluate the option's cost to the government, and find that the ex-ante cost of the option ranged from 0.8% to 6.4% of loan principal between 1998 and 2005. Using a sample of 700,000 student loan records, we find that borrowers responded to the time-varying incentives to consolidate although some left sizeable amounts of money on the table; that more indebted borrowers were more likely to optimize; and that there is some evidence of learning over time.

We study the crash of bank stock prices during the COVID-19 pandemic. We find evidence consistent with a “credit line drawdown channel”. Stock prices of banks with large ex-ante exposures to undrawn credit lines as well as large ex-post gross drawdowns decline more. The effect is attenuated for banks with higher capital buffers. These banks reduce term loan lending, even after policy measures were implemented. We conclude that bank provision of credit lines appears akin to writing deep out-of-the-money put options on aggregate risk;we show how the resulting contingent leverage and stock return exposure can be incorporated tractably into bank capital stress tests.

This paper shows that higher information technology (IT) adoption by banks led to a larger increase in corporate lending in the months following the COVID-19 outbreak in Italy. Examining banks with heterogeneous degrees of IT adoption, we investigate the dynamics of credit and its allocation across firms using a new database with detailed information on bank IT expenditures and propensity to innovate matched with bank-firm level data on credit growth before and during the pandemic. Using a difference-in-differences identification strategy, we find that banks with higher intensity of IT adoption increased their credit more than others during the pandemic. The increase was concentrated in term loans extended to smaller and financially sounder companies; the effect was stronger in the initial phase of tighter restrictions to firm activity and individual mobility, and more significant for undertakings active in the sectors most affected by the shock. We provide evidence that these results are driven by both bank's ability to offer credit entirely on-line and bank's use of digital technologies for creditworthiness assessment. We find that physical proximity between borrowers and lenders remained important for credit provision during the pandemic, but only when combined with high level of IT adoption.

Banks are unique in designing loan contracts. Contract design determines liquidation and continuation decisions of firms. Smaller firms are often the weaker party when interacting with their banks. We study a legal reform that aims to improve small firms’ bargaining position by altering the contractual environment. The new law gives small firms the right to prepay loans against a contractually specified penalty and requires banks to offer firms’ best-suited loan type. Using this quasi-natural experiment, we show that, while the legal reform increases overall credit availability, banks dampen the effect of the act by tilting their credit supply to loans that are unaffected by the legal change, i.e., credit lines. Using bank-firm-credit-type data, we show that banks reduce the supply of term loans by 0.7% while credit lines increase by 4%. This effect is more pronounced for borrowers with longer relationships. Our results show that reforms generate unintended consequences since banks strategically try to undo part of the regulation.

We document the effects of higher borrowing cost on private firms by exploiting a novel quasi-experiment and a unique and comprehensive dataset from Sweden. In June 2010, the central bank of Sweden increased the repo rate unexpectedly and exposed firms with long term loans maturing right before or after the hike to different cost of borrowing. Consistent with the debt overhang theory, we find that higher cost of borrowing has a significant negative effect on investment, and more for highly levered firms. Contrary to the risk shifting theory, we find no evidence that distressed firms engage in activities that are riskier ex-post.

We study the crash of bank stock prices during the COVID-19 pandemic. We find evidence consistent with a “credit line drawdown channel”. Stock prices of banks with large ex-ante exposures to undrawn credit lines as well as large ex-post gross drawdowns decline more. The effect is attenuated for banks with higher capital buffers. These banks reduce term loan lending, even after policy measures were implemented. We conclude that bank provision of credit lines appears akin to writing deep out-of-the-money put options on aggregate risk; we show how the resulting contingent leverage and stock return exposure can be incorporated tractably into bank capital stress tests.

Credit banks in the United States provide specialized financial services to low-income communities through community lending projects. These projects provide "financing for economic development projects for targeted beneficiaries, and, for... purchasing or funding small business loans, ... or community development loans,” including low-credit mortgages and low-interest term loans. Generally grouped as "financial inclusion" initiatives, these services represent a renewed endeavor amongst banks to strengthen Environmental, Social, and Governance (ESG) factors. This paper will examine the extent to which banks have been genuine community lenders, drawing on shareholder letters and annual reports from Citibank and Wells Fargo to qualitatively determine the institutions’ messages. From there, I will examine the balance sheets to account for the distribution of liabilities, particularly the extent to which ESG programs contribute to losses for banks. To further substantiate the extent of some of these practices, including fraudulent accounts and excessive overdraft fees from 2010-2018, the paper will draw on direct reports from the US Federal Government, including statements from the Department of Justice indicting Citibank & Wells Fargo for alleged illegal misreporting of profits and accounts. I will research data from academic papers published by the University of Michigan, the National Bureau of Economic Research, and the Annals of Regional Science. Ultimately, I will try to prove with these sources the extent of the risk community lending posed on corporate profits and whether the tradeoff can be ultimately profitable for the banks.

Small and Medium scale Enterprises (SMEs) are important for successful economic growth and social development. There is a global increasing recognition of the importance of Small and Medium Scale Enterprises in terms of supporting overall economic growth and development. The primary purpose of the study was to assess the contribution of SMEs financing towards economic growth for Zimbabwe. Specifically, the study investigated the impact of SMEs financing on GDP growth, Job Creation, Poverty Datum Line, and Revenue Generation. The study focused on the classical and the modern theories mainly the Neoclassical Growth Theory, Finance-Growth Theory, Lending theory, Signaling theory, the pecking order theory and the Access to finance Theory of Change. This study adopted the positivism research paradigm and an explanatory correlational study design since it helped the researcher to comprehend and describe how SME Financing drives economic growth. In this study all registered SMEs who received loans from all commercial banks in Zimbabwe since 2015 represented the entire target population. The SMEs sector was selected due to its importance in Zimbabwe achieving the economic pillar of Vision 2030. The data gathered was presented and analyzed in a way that enabled statistical inferences to be made. Statistical methods of presentation such as time series plots, descriptive statistic tables, Correlograms and Multiple Linear regression model were used to aid comparability and ensure meaningful interpretation. Tests were performed on sample data to ensure that required conditions were met before regression modelling. The model was fitted using Eviews 10 statistical data analysis package. In a correlational study, the researcher examined whether and to what degree a statistical relationship exists between SMEs financing and Economic Growth. This study employed Classical Linear Regression Model (CLRM) to ascertain the statistical relationship between SMEs financing and Economic Growth. To evaluate the appropriateness and validity of the model the study analyzed the properties of the statistical distribution of the residuals generated by the fitted model to check for autocorrelation, heteroscedasticity and normality. The overall significance of the model was also evaluated by inspecting the model’s coefficient of determination (R-squared) and the probability value for the F-statistic. The estimated models found SMEs financing to have a significant positive effect on Economic Growth with respect to GDP Growth and Revenue generation through Tax Formation. However, it was revealed that SMEs Financing has no significant effect on changes in the movement of the Poverty Datum Line. It was also revealed that SMEs financing has failed to stimulate job creation in Zimbabwe due to continued rise in unemployment levels coupled by closure of large corporates. Greater efforts should be made to make available, short, medium and long term loans to productive investments like SMEs as they constitute an integral part of the growth and transformation process of an agro-based economy like that of Zimbabwe. The central Bank of Zimbabwe (RBZ) should ensure that all the SMEs keeps appropriate records of what is required by banks for extension of their credits to individuals. More so, the Reserve Bank of Zimbabwe should strengthen its monetary policy tools in order to stabilize costs of doing business and lending cost. Future studies should therefore consider also investigating the impact of both private equity and public sector investment on economic growth in order to get an exhaustive picture on the implications of financing SMEs, Private Equity firms and publicly listed firms on economic development.

Using the UK SMEs Finance Monitor data over 2011-2017, we explore the determinants of bank debt rejections for UK SMEs. In the wake of the global financial crisis, business overdrafts and term loans show slightly different trends although the factors affecting rejections are similar. We find that since 2014 rejection rates reduced for both facilities and they remained stable in the run-up to the Brexit referendum and its immediate aftermath, although export and import SMEs operating in industries with a high share of EU trade experienced tigher conditions. Further, we present robust evidence that firms with female owners, organised in partnerships, and with a higher initial credit balance are more likely to have their credit application approved. Finally, younger, smaller and more innovative SMEs are more likely to be rejected, while their chance of being successful in their credit applications increases substantially after 2014.

E - books have an important place in library collections in supporting education and research activities. Libraries need to follow and evaluate different acquisition models which vary by supplier, in order to create an effective and balanced collection by us ing their budgets efficiently. There are different e - book acquisition models that show under which conditions content by suppliers may be accessed. These models are constantly changing due to economic conditions and technological developments. The purpose of this study is to investigate how the choice of acquisition model affects total library expenditures, whether the choice of model changes according to the discipline, and which are the most cost - effective unit - use procurement models. In this study, based on real usage data from Hacettepe University Libraries, e - book acquisition models offered by the publisher and aggregator were tested and, then cost and subject analyses were made with the developed scenarios. Among the models offered by the publisher a u nit usage cost of 1.18€ was seen in the EBA (Evidence Based Acquisition) model. If this model was preferred there would be guaranteed lower expenses. Among the models offered by the aggregator, the lowest unit usage cost ($13.75) was seen in the DDA (Deman d Driven Acquisition) model with STL (STL – Short Term Loan). With the use of STL, the most used titles were purchased automatically, and the DDA model with STL became an economical option for the library. It was concluded that the frequency of e - book usag e varies according to discipline, and unit usage costs vary depending on the total cost paid and the number of uses. The budget of the library, the supplier conditions, and usage data affect the preference of acquisition models according to discipline. The results of this research, in which a comparative cost analysis of e - book acquisition models was performed, should be used in collection development and management. Usage data should be analyzed, and the most appropriate and economic acquisition models sho uld be determined, in order for budgets to be used more effectively.

Agricultural finance is indispensable for enhancing productive capacity in both small-scale and commercial farming. This study sought to establish the current status of agricultural financing by 12 registered and operational commercial banks in Zimbabwe in the year 2019. Questionnaires and interview guides were used to collect data. SPSS and NVivo were used for data analysis. All the commercial banks participated in agricultural financing with an average agricultural loan portfolio of 30%. However, their participation in agricultural lending is yet to reach the pre-land reform maximum of 91.3% attained in 1999. Land tenure and weather risks, as well as lack of collateral among farmers reduced the banks’ appetite for lending to the agricultural sector. The majority of the commercial banks offered value chain finance, invoice finance, overdraft facilities, and term loans to agricultural sector clients that mainly included; suppliers, medium-scale, and large-scale commercial farmers. The study established a mismatch in the demand and supply of loans in the medium to long term tenure range of 1 to more than 3 years. There was low demand for 1-3-year tenure loans according to the commercial banks, and a corresponding deficit in the supply of highly demanded longer-term loans of more than 3 years for capital expenditure (CAPEX). Therefore, government should aim to; stabilize currency; arrest hyperinflation; restore economic stability; address land tenure to ensure the bankability of the 99-year Lease; and create an environment that is conducive for investment in climate and weather resilience infrastructure. Local farmers should also invest in human and physical capital to improve their access to bank credit. JEL Code: Q14

A salient feature of the $1.2 trillion auto-loan market is the extension of loan maturity terms in recent years. Using a large, national sample of auto loans from the entire auto market, we find that the default rates on six- and seven-year loans are multiple times that of shorter five-year term loans. Most of the default risk difference is due to borrower risks associated with longer-term loans, as those longer-term auto borrowers are more credit and liquidity constrained. We also find borrowers’ loan-term choice to be endogenous and that the endogeneity bias is substantial in conventional default model estimates. To mitigate this risk, we separately estimate instrumental variable regression and simultaneous equation models. Finally, we find evidence of adverse selection in borrowers’ loan-term choices in the years when six- and seven-year loans first became widely used, which dissipates over time as lenders adjust to risks in the market.

Using the theoretical framework of spatial econometrics, we estimate the impact of capital markets, i.e., stock markets, medium-and-long term bond markets, and medium-and-long term loan markets, on industrial structure upgrading (ISU) across 31 provinces in China from 1998 to 2015. We apply an explanatory spatial data analysis (ESDA) to detect the presence of spatial dependence and use a spatial Durbin model (SDM) to examine spatial distribution and spatial association. Although our overall estimation results from the 31 provinces indicate a degree of correlation between capital markets and industrial structure upgrading, the magnitude of spatial spillover effects in three sub-markets on ISU differ. We divide the 31 provinces into four economic zones, and explore the impact of three sub-markets on ISU in the eastern zone, central zone, western zone, and northeastern zone. Using our results, we provide policy suggestions that better facilitate ISU in China.

We use supervisory data to investigate the ex-ante credit risk taken by different types of lenders in the U.S. syndicated term loan market during the LSAPs period. We find that nonbank lenders, mutual funds and structured-finance vehicles, take higher risk when longer-term interest rates decrease. The results are stronger for mutual funds that charge higher fees. Banks accommodate other lenders’ investment choices by originating riskier loans and selling them off. These results are consistent with “search for yield” by nonbanks and with a risk-taking channel of monetary policy. Over the sample we study, lower longer-term interest rates appear to have only a minimal effect on loan spreads.

We study the effects of U.S. interest rates and other factors on risk-taking in the global market for U.S. dollar syndicated term loans. We find that, before the Global Financial Crisis, both U.S. and non-U.S. lenders originated ex ante riskier loans to non-U.S. borrowers in response to a decline in short-term U.S. interest rates and, after the crisis, in response to a decline in longer-term U.S. interest rates. After the crisis, this behavior was more prominent for shadow banks and less prominent for banks with relatively low capital. Separately, before the crisis, lenders originated less risky loans in response to U.S. dollar appreciation. Across the periods, the responses to risk appetite and economic uncertainty varied. To the extent that the Federal Reserve affects U.S. interest rates, we provide evidence of global risk-taking spillovers of U.S. monetary policy, which are important but not dominant factors for risk-taking in the market.

Making investment decision is a complex and dynamic process. The present study was conducted to identify the investment pattern of micro, small and medium powerloom enterprises of Ludhiana district in Punjab. The selected sample for the conducting survey through interview technique consisted of 128 MSMEs. All the micro (50 units) and medium powerloom enterprises (2 units) were included in the sample due to their limited total number in the list of enterprises, whereas purposive probability proportional to size sampling technique was employed to select small enterprises (76 units). Results revealed that highest percentage of the owners (71.09%) had invested their own capital to establish their enterprises, while only 7.03 per cent MSMEs had borrowed capital from friends and relatives. The owners of medium enterprises had arranged funds from public sector banks. More than half of the total MSMEs (57.14%) were operating through cash credit limit sanctioned by banks for buying of raw material and machinery. Only 15.38 per cent of the owners had availed Machinery Term Loan to get subsidy on new shuttle-less looms. Low enthusiasm prevailed among MSMEs to take benefit of subsidy schemes offered by the government. Profit percentage reported by majority of micro enterprises (84.00%) was 5-10 per cent, while according to 48.68 per cent small enterprises, it was 10-15 per cent. The profit reported by medium enterprises was upto 25 per cent. The profit percentage for medium enterprises ranges from 12 to 25 per cent. Thus, an increase in profit percentage was observed with the increase in investment pattern.

Purpose This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies for risks related to loan losses, the ratio of interest income to total loans and solvency perspectives. Design/methodology/approach Using a large sample of different types of Swedish financial institutions, this paper uses a panel framework to examine the relationships between abnormal loan growth rates and loan losses, interest income as a percentage of total loans, changes in the equity to assets ratio and changes in z-score. Findings The findings show two important points of evidence. First, abnormal lending to retail customers increases loan losses and interest income in relation to total loans. Second, abnormal lending to other credit institutions decreases loan losses and significantly changes the capital structure by increasing the reliance on debt funding and significantly improves the z-score measure. Research limitations/implications The findings provide useful implications for the management of loan portfolios for a wide range of Swedish financial institutions, identifying two components: abnormal lending to households may increase loan losses and increase interest income in relation to total loans, and excessive lending to other credit institutions may reduce solvency risk and allow more debt financing for the financial institution. Originality/value This is the first study to use a panel framework in analyzing the behavior of different types of Swedish financial institutions in relation to loans granted to retail customers and other credit institutions.