Keywords: Credit ratings, Sovereign ceiling, Bank credit, Information asymmetry, Relationship lending, Firm credit constraints.
JEL classification: F34 ; G21; G24; G28; G32; H6
학회소식
[2022년 5차 CAFM2022]Lending at arm’s length: How do sovereign ceiling policies really matter for corporate borrowers?
작성자 : 관리자
조회수 : 245
게시일 :
2022-12-20
We examine the effect of firm credit rating downgrades on the pricing of syndicated bank loans following rating downgrades in the firms’ countries of domicile. We find that the sovereign ceiling policies used by credit rating agencies create a disproportionally adverse impact on the bounded firms’ borrowing costs relative to other domestic firms following their sovereign’s rating downgrade. We futher show that information asymmetry between lenders and borrowers, as well as within the lending syndicate, constitutes an important mechanism through which the sovereign ceiling rule leads to higher loan spreads. However, we find that not all firms are equally penalized: relationship and cross-listed borrowers with subsidiaries in the lender’s country and borrowers operating in competitive industries are much less affected.
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