Creditor Control Rights and the Pricing of Corporate Loans

Marc Arnold, Nicola Kollman and Angel Tengulov
Additional contact information
Marc Arnold: University of St. Gallen and Swiss Finance Institute
Nicola Kollman: University of St. Gallen
Angel Tengulov: University of Kansas

No 23-35, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This study investigates the influence of creditor control rights on the pricing of corporate loans. We construct a novel dataset that combines hand-collected covenant violations data with individual borrowers, creditors, and loan contract information. Our data allows us to distinguish between creditors who receive direct control rights after a covenant violation and creditors who do not receive control rights after a violation. By comparing the loan terms of these two creditor types, we can isolate the impact of creditor control rights on loan pricing from that of other factors related to a covenant violation. We find that creditors exploit control rights to overprice new loans, and that this rent extraction is a key determinant of the loan premium puzzle.

Keywords: Loan Pricing; Creditor Governance; Creditor Control Spread (search for similar items in EconPapers)
JEL-codes: G12 G21 G34 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2023-02, Revised 2023-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4345354 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2335

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().