Author Archives: Derrald Stice

Banks Have Sticky Preferences for Loan Contract Design: Lender-Side Determinants of Debt Covenant Inclusion

By | June 14, 2021

            Banks develop expertise from their prior lending experience in monitoring borrowers’ financial activities in order to mitigate conflicts of interests between managers and creditors arising from asymmetric information. In loan contracts, covenants have classically been viewed as a method of controlling agency problems by restricting managerial behavior.[1] Covenants can align the interests of the contracting… Read More »

Do Institutional Investors Facilitate New Lending Relationships for Portfolio Holdings? – The Case of Equity Cross-Ownership

By | May 19, 2021

Lending relationships between banks and firms present an important dynamic in well-functioning capital markets. Many academic studies in accounting and finance have explored the effects of lending relationships where the focus is on the repeated interaction between a specific bank and a specific firm.[1] However, we still know relatively little about how these banking relationships form in the… Read More »