Bankruptcy and the Cost of Organized Labor Campello, Murillo; Gao, Janet; Qiu, Jiaping ...
Review of financial studies/The Review of financial studies,
03/2018, Letnik:
31, Številka:
3
Journal Article
Recenzirano
Odprti dostop
Unionized workers are entitled to special treatment in bankruptcy court that can be detrimental to other corporate stakeholders, with unsecured creditors standing to lose the most. Using data on ...union elections, we employ a regression discontinuity design to identify the effect of worker unionization on bondholders in bankruptcy states. Closely won union elections lead to significant bond value losses, especially when firms approach bankruptcy, have underfunded pension plans, and operate in non-RTW law states. Unionization is associated with longer, more convoluted, and costlier bankruptcy court proceedings. Unions depress bondholders’ recovery values as they are assigned seats on creditors’ committees.
Customer concentration and loan contract terms Campello, Murillo; Gao, Janet
Journal of financial economics,
January 2017, 2017-01-00, 20170101, Letnik:
123, Številka:
1
Journal Article
Recenzirano
We study pricing and non-pricing features of loan contracts to gauge how the credit market evaluates a firm’s customer-base profile and supply-chain relations. Higher customer concentration increases ...interest rate spreads and the number of restrictive covenants featured in newly initiated as well as renegotiated bank loans. Customer concentration also abbreviates the maturity of those loans as well as the relationship between firms and their banks. These effects are intensified by customers’ financial distress, the level of relationship-specific investments, and the use of trade credit in customer–supplier relations. Our evidence shows that a deeper exposure to a small set of large customers bears negative consequences for a firm’s relations with its creditors, revealing limits to integration along the supply chain.
Abstract
Firms in the US economy are closely interconnected in a production network and are subject to shocks that propagate within the network. This study examines the liquidity management of firms ...centrally connected in the network. I show that, while central firms are more exposed to aggregate swings, they maintain higher cash holdings to protect themselves and connected firms against such exposure. Central firms’ cash holding motives are alleviated by firm diversification but are aggravated by industry competition. Such motives are not explained by alternative determinants of cash policies. My findings suggest that systematically important firms proactively dampen the propagation of shocks in the production network.
Better access to debt markets mitigates the effects of uncertainty on corporate policies. We establish this result using the staggered introduction of anti-recharacterization laws in US states. These ...laws enhanced firms’ ability to borrow by strengthening creditors’ rights to repossess collateral pledged in special purpose vehicles. After the passage of the laws, firms that face more uncertainty hoard less cash and increase payouts, leverage, and investment in intangible assets. Our findings suggest that better access to debt markets shields firms from fluctuations in uncertainty and decreases firms’ precautionary behavior, contributing to the deployment of cash and other internal resources to investment in intangible capital.
We provide evidence that changes in lender optimism can lead to excessive fluctuations in credit spreads across the credit cycle. Using data on the real estate properties of loan officers originating ...large corporate loans, we find that credit spreads overreact to sophisticated lenders’ recent local economic experiences, captured by local housing price growth. These effects are only present when borrowers own real estate assets and during times of greater uncertainty about real estate values, i.e., boom-and-bust cycles in housing prices. Our analysis suggests that recent personal experiences shape sophisticated lenders’ beliefs about real estate values, which affect their pricing decisions.
Abstract How does firm-specific human capital shape careers in the finance industry? We build a dynamic model where workers accumulate portable and nonportable (firm-specific) human capital and learn ...about their match quality with employers. Estimating the model using granular data on M&A advisory bankers, we show that a large fraction of bankers’ human capital is nonportable, ranging from 12% to 46% across different firm types. Bankers make a dynamic trade-off between portability and returns on human capital, leading to time-varying job preferences over their life cycle. Our results have broad implications for careers in finance and the provision of financial services.
Partisanship in loan pricing Dagostino, Ramona; Gao, Janet; Ma, Pengfei
Journal of financial economics,
December 2023, 2023-12-00, Letnik:
150, Številka:
3
Journal Article
Recenzirano
Does partisanship influence the way investors price financial assets? Using voter registration data of bankers originating large corporate loans, we show that bankers whose party differs from that of ...the U.S. President charge 7% higher loan spreads than other bankers. This effect holds regardless of borrowers’ partisanship, and becomes stronger for politically active bankers and when partisan media exhibit greater disagreement. Bankers do not match disproportionately with co-partisan borrowers but they lead syndicates more frequently with co-partisan bankers. Our results are not driven by bank or borrower fundamentals, but suggest that investor optimism, driven by political alignment, shapes asset prices.
Abstract
We examine how cross-country differences in capital regulations shape the structure of global lending syndicates. Using globally syndicated loans extended by banks from forty-four countries, ...we find that strictly regulated banks participate more in syndicates originated by lead lenders facing less stringent capital regulations. The resulting lending syndicates extend loans to riskier borrowers, charge higher spreads, forego covenants more frequently, and incur higher default rates. Such syndication activity also facilitates the access to credit by riskier corporations and exposes both participants and lead arrangers to greater systemic risk. Overall, our finding is consistent with the explanation that strictly regulated banks rely on the expertise of loosely regulated banks to procure risky deals outside the border.
Credit and Punishment Gao, Janet; Kleiner, Kristoph; Pacelli, Joseph
The Review of financial studies,
12/2020, Letnik:
33, Številka:
12
Journal Article
Recenzirano
We examine whether bankers face disciplining consequences for structuring poorly performing corporate loans. We construct a novel data set containing the employment histories and loan portfolios of a ...large sample of corporate bankers and find that corporate credit events (i.e., downgrades, defaults, bankruptcies) increase banker turnover. The effect is pronounced when bankers issue loans with loose terms or experience severe losses. Credit events prompt bankers to adopt stricter future risk management practices, such as offering restrictive covenant packages. Overall, our findings are consistent with banks disciplining employees as a means to manage their own risk exposure.
We investigate the extent to which loan officers generate independent, individual effects on the design and performance of syndicated loans. We construct a large database containing the identities of ...loan officers involved in structuring syndicated loan deals, allowing us to systematically disentangle borrower, bank, and loan officer fixed effects. We find that loan officers have significant influence on interest spreads, loan covenant design, and loan performance. Inclusion of borrower fixed effects increases our power to rule out the alternative that loan officer fixed effects reflect the matching of officerds to borrowers based on time-invariant borrower characteristics. We document heterogeneity in loan officers’ influence across loan contract terms, with loan officers exerting stronger influence over covenant package design than over interest spreads, but marginal influence on loan maturity. Lead officers have greater influence than participant officers over covenant package design and loan performance, but less robust differential influence on interest spreads.
•We investigate the extent to which loan officers generate independent, individual effects on the design and performance of syndicated loans.•We construct a large database containing the identities of loan officers involved in structuring syndicated loan deals.•We find that loan officers have significant influence on interest spreads, loan covenant design, and loan performance.•Loan officers exert a stronger influence over covenant package design than over interest spreads, but marginal influence on loan maturity.•Lead officers have greater influence than participant officers over covenant package design and loan performance, but less robust differential influence on interest spreads.
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