Determinants of global loan pricing: Creditor rights or country size?

Manthos D. Delis and Maria Iosifidi

Journal of Financial Stability, 2025, vol. 78, issue C

Abstract: Using global data on syndicated loans, we show that any negative effect of stronger creditor rights on loan spreads, as identified in the prior literature (Qian and Strahan, 2007; Bae and Goyal, 2009), disappears once we include a single country characteristic: country size. This finding is robust to several identification methods, both global samples and within-country changes in creditor rights, different panel spans, and hundreds of control variables. We identify that key origins of the effect of country size on loan pricing are ethnic fractionalization and within-country heterogeneity in economic preferences, which create country risk.

Keywords: Creditor rights; Bank credit; Loan spreads; Country size; Ethnic fractionalization; Economic preferences (search for similar items in EconPapers)
JEL-codes: G20 G21 G41 Z13 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:78:y:2025:i:c:s1572308925000257

DOI: 10.1016/j.jfs.2025.101396

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