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This paper aims to examine how a firm’s political party orientation (Republican or Democratic), which is measured as the composite index based on the political party leanings of top managers, affects bank loan contracts. This study also investigates how the political culture of local states has a significant impact on loan contracts.

This research uses various databases including the Loan Pricing Corporation’s DealScan database, financial covenant violation indicators based on the Securities and Exchange Commission (SEC) filings, firm bankruptcy filings and political culture index data to examine the impact of political orientation on the cost of debt. This paper also includes the state level of gun ownership and bachelor’s degrees to investigate how local political culture affects the loan contract. To control endogenous concerns, this paper uses an instrumental variable analysis.

Firms that have Republican-oriented political identities pay lower yield spreads for the main costs of debt including all-in-spread-drawn and all-in-spread-undrawn. This pattern is consistent with other fees of bank loans. This paper finds that an increase in conservative political policies toward Republican orientations is negatively associated with the cost of debt. The main findings also show that the political culture in the state where the headquarters of the borrowing firm are located plays an important role in bank loan contracts.

The findings in this paper provide evidence that a firm’s political party orientation significantly affects the loan contract terms in both pricing and non-pricing terms. To the best of the author’s knowledge, this is the first study that shows the importance of political party identification on loan contracts by separating the sample into Republican, neutral and Democratic.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

The purpose of this paper is to fill this void in the existing literature and investigate how firms’ disclosure policies influence bank loan contracting in emerging markets after controlling for the influence of borrowers’ private information obtained by banks. Furthermore, the paper examines how firms’ disclosure and non-disclosure governance interact to affect financial contracts.

The key variables Disclosure and Firm Governance are based on a survey by Credit Lyonnais Securities Asia (CLSA) in 2000. The paper hand-merges CLSA disclosure and governance data with the Dealscan database and Worldscope database by firm names. The paper conducts a multivariate analysis to investigate how firms’ disclosure policies influence bank loan contracting and how firms’ disclosure and non-disclosure governance interact to affect financial contracts.

The authors found that firms with superior disclosure policies obtain bank loans with more favorable loan contracting terms, such as larger amounts, longer maturity, and lower spread. In addition, the effects of disclosure on bank loan contracting are more pronounced for borrowers with superior firm-level non-disclosure governance or firms located in a country with better country-level governance.

The paper provides a more comprehensive view of the effects of corporate disclosure has on financial contracts in emerging economies.

The purpose of this paper is to examine how a firm’s investment behavior relates to its subsequent bank loan contracting.

Using a sample of US firms during the period 1992-2011, the authors examine the association between overinvestment (underinvestment) and three characteristics of bank loan contracts: loan spread, collateral requirement, and loan maturity.

The authors find that overinvesting firms obtain loans with higher loan spreads. Additional tests show that the effect of overinvestment on loan spreads is generally more pronounced in firms with lower reputation, weaker shareholder rights, and lower institutional ownership. The effect of overinvestment on collateral requirement is mixed, and investment efficiency has no significant relation to loan maturity.

The results are subject to the following caveats. First, while the study provides empirical evidence that investment efficiency affects bank loan contracting terms, especially the cost of bank loans, the underlying theory is not well-developed. The authors leave it up to future research to provide a theoretical framework to clearly distinguish the cash flow and credit risk effects of past investment behavior from those of existing agency conflicts. Second, due to data limitation, the sample size is small, especially when the authors control for corporate governance measured by G-index and institutional ownership.

The finding that overinvestment is costly to corporations suggests that managers should consider the potential trade-offs from such investment decisions carefully. The evidence also alerts shareholders and board members to the importance of monitoring management investment decisions. In addition, the authors find that corporate governance moderates the relationship between investment decisions and cost of bank loans, suggesting that it would be beneficial to design effective governance mechanisms to prevent management from empire building and motivate managers to pursue efficient investment strategies.

First, the findings enhance understanding of the potential economic consequences of overinvestment decisions in the context of a firm’s private debt contracting. The evidence suggests that lenders perceive higher credit risk from overinvestment than from underinvestment, likely because firms squander cash in the current period by investing in (negative net present value) projects that are likely to result in future cash flow problems. Second, the study contributes to the literature on the determinants of bank loans by identifying an observable empirical proxy for uncertainty in future cash flows that increases credit risk.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.