Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 7, 2023 erstellt
Description:
We examine how banks perceive and price related party transactions (RPTs) into the cost of debt for borrowers affiliated with a business group. For this, we use a unique dataset that brings together information on RPTs, ownership structure, and syndicated loans of Asian firms. Our results show that debtholders perceive both transactions that can be potentially used for tunneling activities (detrimental RPTs) and propping up (beneficial RPTs) as harmful, demanding a higher interest rate to be compensated for their expected impact on the cost of failure. The way banks price detrimental and beneficial RPTs depends on the ownership structure and the creditworthiness of borrowers, and the institutional environment. Our evidence suggests that banks understand the complex nature of RPTs in firms affiliated with a business group and thereby exert a disciplining role