The impact of laws and institutions on financial contracts: Evidence from relationship lending across the world

Chinmoy Ghosh and Fan He

Journal of Banking & Finance, 2023, vol. 148, issue C

Abstract: Using loan data from public firms from 40 countries, we examine the association between lending relationships and loan contract terms. We find significant variation across countries regarding the benefits and costs of banking relationships, which can be explained by the countries’ differential legal and regulatory environments. In countries with weak disclosure regulations and institutions, borrowers pay significantly higher interest rates on relationship loans. However, as countries’ disclosure regulations improve, the gap in the interest cost between relationship and transactional loans is reduced. In further corroboration of this effect, we document an improvement in the relative costs of relationship lending following a country's IFRS adoption.

Keywords: Relationship lending; Loan contract terms; International (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426622003211
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:148:y:2023:i:c:s0378426622003211

DOI: 10.1016/j.jbankfin.2022.106741

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().