Religiosity and the cost of debt

Lending Corruption and Bank Loan Contracting: Cross-Country Evidence

“…Giannetti and Yafeh (2012) find that cultural differences between lenders and borrowers lead to a higher cost of debt, smaller loan size, and shorter maturity. Chen et al (2016) find that religiosity is negatively related to the cost of a bank loan. We extend the prior literature by documenting that bribing loan officials also plays an important role in these contracts.…”

“…In particular, the question does not ask whether the 9 Beck, Demirguc-Kunt, and present an extensive discussion of this lending corruption measure. 10 Following Edwards (1992) and Chen et al (2016), we also construct an alternative weighted lending corruption index for each country. We use the number of survey responses in each country as the weight.…”

“…Second, our paper contributes to the cross-country bank loan contracting literature (e.g., Qian and Strahan, 2007;Bae and Goyal, 2009;Kim, Tsui, and Yi, 2011;Giannetti and Yafeh, 2012;Chen et al, 2016). A strand of literature investigates the impact of legal environments on bank loan contracting (Qian and Strahan, 2007;Bae and Goyal, 2009).…”

Governance and Stakeholders

“…and Wiggins (1984) argue that "labor representation on the firm's board can overcome informational problems and lead to Pareto-efficient solutions". Jensen and Meckling (1979) dispute this, modelling codetermination in the framework of Consistent with this convergence of employees and creditors interests, Benelli et al (1987), Schmid (2000, 2004) and Chen et al (2016) link enhanced worker influence via codetermination reforms to increased leverage. Indeed, much of this evidence is consistent with banks' political influence pushing Germany towards enhanced employee representation on boards.…”

“…Djankov et al (2007) show that different countries' legal systems provide creditors rights of very different strength. Where creditor rights are stronger, borrowing is less costly and credit is more available (Djankov et al 2007;Qian and Strahan 2007;Bae and Goyal 2009;Boubakri and Ghouma 2010;Chen et al 2016;Feldhütter, et al 2016;Rodano et al 2016). Credit also becomes more available after countries strengthen creditor rights (Giannetti 2003;Djankov et al 2007).…”