THREE ESSAYS ON LENDING AND CORPORATE DEBT STRUCTURE

This dissertation explores bank lending and corporate debt structure. The first essay tests the impact of government expropriation risk on the terms of cross-border syndicated loans. By comparing loans by foreign lenders from countries covered by bilateral investment treaties (BITs) to loans from non-covered countries, we isolate and quantify the impact of strengthening property rights against government expropriation on loans. We find that stronger property rights lead to a lower cost of debt, larger loans, larger syndicates, less collateral, and fewer covenants. Results are stronger in countries with a history of government expropriations and robust to methodologies accounting for the endogenous nature of BITs and for the simultaneous determination of loan terms. Our findings persist after the inclusion of other metrics of institutional quality, such as legal origin identifiers and an index of creditor rights risk. The second essay analyzes the effect of trust on debt contracting. We find that, after the revelation of option backdating, borrowers that likely backdated their previous option grants pay higher interest rates on loans, especially if borrowers and lenders lack prior lending relationships or are geographically distant, and if the borrowers retain their CEOs. Conversely, we find no impact on the cost of public debt. Furthermore, after the revelation, firms engaged in backdating increase their reliance on public debt, and those without access to the public debt market experience capital constraints. The third essay investigates how product market competition affects a firm’s choice between private and public debt in financing mergers and acquisitions. I find that acquirers facing intense product market competition prefer private debt, especially for firms in industries with more potential bidders and for firms with lower market share. I also show that higher product market competition increases the cost of private debt, particularly for firms that rely heavily on their relationship lenders, while it has no impact on the cost of public debt. Collectively, these findings suggest that disclosure costs associated with product market competition increase acquirers’ reliance on private over public debt, despite it being relatively more expensive.

Grantor dc:publisher

State University of New York at Buffalo

Year dc:date.issued

2018

Author dc:creator

• Lee, Haekwon

Contributors dc:contributor

• Chung, Kee
• Finance

• finance

Statement dc:rights

• Users of works found in University at Buffalo Institutional Repository (UBIR) are responsible for identifying and contacting the copyright owner for permission to reuse. University at Buffalo Libraries do not manage rights for copyright-protected works and cannot assist with permissions.
• Copyright retained by author.

Language dc:language

eng

Handle dc:identifier

http://hdl.handle.net/10477/78065

OAI record oai:identifier

https://ubir.buffalo.edu/oai/request?verb=GetRecord&metadataPrefix=qdc&identifier=oai%3Aubir.buffalo.edu%3A10477%2F78065