Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments Jun 22, 2020 erstellt
Description:
We study how lender-shareholder distance affects loan contract terms. We hypothesize that an increase in lender-shareholder distance aggravates the lender's information asymmetry vis-à-vis shareholders by making it difficult to observe shareholders' risk preferences and their influence on management, preventing lenders from effectively monitoring shareholders' actions. Therefore, ex ante, lenders design loan contracts with stronger protection against shareholder misappropriation of assets by tightening price and non-price terms of loans. Supporting our hypothesis, we find that lender-shareholder distance is positively related to loan spreads, the likelihood of collateral requirements, and the number of covenants, and negatively related to loan maturities, loan accessibility, and covenant slack. These results are particularly pronounced among firms with more active institutional shareholders, firms with less diversified shareholders, lower-rated firms, and more financially constrained firms. Using an instrumental variables regression approach and the introduction of a new airline route as an exogenous shock to lender-shareholder distance does not change the results