Colonnello, Stefano; Koetter, Michael; Stieglitz, Moritz - In: Economic Inquiry 59 (2020) 1, pp. 459-477
Theoretically, bank's loan monitoring activity hinges critically on its capitalization. To proxy for monitoring intensity, we use changes in borrowers' investment following loan covenant violations, when creditors can intervene in the governance of the firm. Exploiting granular bank-firm...