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Creditor Rights, Enforcement, and Bank Loans

Authors Bae, Kee-Hong HKUST affiliated (currently or previously)
Goyal, Vidhan K. View this author's profile
Issue Date 2009
Source JOURNAL OF FINANCE , v. 64, (2), 2009, APR, p. 823-860
Summary We examine whether differences in legal protection affect the size, maturity, and interest rate spread on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of contracts by reducing loan amounts, shortening loan maturities, and increasing loan spreads. These effects are both statistically significant and economically large. While stronger creditor rights reduce spreads, they do not seem to matter for loan size and maturity. Overall, we show that variation in enforceability of contracts matters a great deal more to how loans are structured and how they are priced.
ISSN 0022-1082
Rights This is a preprint article published in the Journal of Finance © copyright 2009 Wiley-Blackwell. The original journal article is posted on the journal's web site at
Language English
Format Article
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