The Relationship between the Completeness of Bank Loan Contract and Corporate Financial Decisions

• Main Authors: Pei-Heng Wang, 王培恆
• Other Authors: Wen-Chien Liu
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/ty9g86

碩士 === 中原大學 === 財務金融研究所 === 107 === Using several measures of contract completeness based on text analysis, this paper uses the texts of private loan contract of US non-financial public corporations to explore each relationship between the completeness of covenants sections or defaults sections of bank loan contract and corporate financial decisions. The empirical results find that the completeness of covenants sections and defaults sections has different effects on the company''s financial decisions. The more complete the covenants sections, the better the company''s performance and the lower both the company''s cash holdings and capital expenditures, while the more complete the defaults sections, the worse the company''s performance, the lower the company''s cash holdings and the more capital expenditures. Alternatively, we find that the more complete both of covenants sections and defaults sections, the corporate''s performance would be improved after the contract was signed. Overall, a complete loan contract is good for the company''s performance, and creditors play an active role in corporate governance and management decisions.