This paper investigates whether informed ownership alleviates information asymmetry in bank loan pricing. We use local long-term institutional ownership (LLTIO) as a proxy for exogenous ownership that possesses geography-related soft information, and show that it is negatively associated with the spread charged by syndicate lenders. The negative relation between LLTIO and loan spread is salient only when geography-related soft information helps the lender to evaluate the borrower’s creditworthiness and when conflicts of interest between equity and debt holders are unlikely. We show that the mechanisms for the LLTIO effect include the alleviation of both moral hazard and adverse selection problems.
JEL classifications: G21, G24, G32
[2015년 제 2차] Can Local Long-term Institutional Ownership Allevia
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게시일 :
2015-06-03