The Effects of the Characteristics of Taiwan Listed and OTC-listed Companies and their Loan-granting Banks on the Terms of Loan Contracts

• Main Authors: Chun Hung Lin, 林俊宏
• Other Authors: Jauling Tseng, Ph. D.
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/22438826894328914624

碩士 === 世新大學 === 財務金融學系 === 92 === This study aims to investigate how firm’s characteristics and banks’ attributes can affect the firm’s banking relationship and its corresponding equilibrium terms of loan contracts. Most of past literature only used either indicators of a company’s financial characteristics or its banking relationship to derive its terms of borrowing with the bank and largely ignored the possible influence of bank attribute variables. However, both the company’s corresponding relationship with its banks and the final equilibrium terms of loan contracts agreed upon by the bank and the borrowing firm are in fact the result of interaction between the financial characteristics of the company itself and the attributes of its corresponding banks. In other words, the use of a company’s corresponding banking relationship or the variables of the company’s financial characteristics alone as the sole influential factor to the terms of loan contracts may likely lead to the result of missing the wood for the trees. Therefore, this study adopted a Panel Simultaneous Equation model using domestic listed and OTC-listed companies’ data on long- and short-term bank loans from 1995 to 2002 to perform a simple empirical test on the influence of the companies’ characteristics and banks’ attributes on the company’s banking relationship and on the terms of loan contracts in an effort to provide a more precise picture of the borrowing and financing behaviors between a company and its banks. The study found that companies with good performance and under low information asymmetry appeared to be able to secure lower bank loan rates, and companies of a relatively large size with a high growth rate and a poor solvency position tended to maintain a larger number of corresponding banks. In addition to financial indicators and banking relationship, which have been proved to have a substantial influence over the final equilibrium terms of loan contracts, this study also found that the bank-attributes variables introduced into the model also had a significant impact on the firm’s banking relationship and on the final equilibrium terms of borrowing that companies could secure with the bank. For instance, banks with higher capital adequacy ratios and stronger liquidity positions tended to apply higher rates for long-term loans and lower rates for short-term ones; companies dealing with banks of a larger scale with a better profitability and a higher liquid reserves ratio therefore were better positioned to maintain only a small number of corresponding banks. This indicates that banks attributes may influence or interfere with a company’s banking relationship and thereby shaping the terms of loan contracts of the company, which is one of the major findings of this study.