Recent years have seen a new trend in commercial bank lending—loans with no financial covenants. These covenant light, or cov-lite, loans raise concerns about excessive risk to lenders due to lack of monitoring. In this study, we examine the consequences of cov-lite loans. Focusing on rated,...

I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching...

We investigate how the availability of traded credit default swaps (CDSs) affects the referenced firms' voluntary disclosure choices. CDSs enable lenders to hedge their credit risk exposure, weakening their incentives to monitor borrowers. We predict that reduced lender monitoring in turn leads...

We examine the discretionary activities that CLO managers engage in to pass monthly overcollateralization (OC) tests. These tests require a CLO's loan portfolio value, scaled by the CLO notes' principal balance, to be above a certain threshold. Using CLOs' granular disclosures, we develop...

This paper examines the impact of loan loss provisions (LLPs) on return predictability during 1994-2017. We find that on average, LLPs are negatively associated with one year ahead stock returns. This effect is particularly significant during the global financial crisis but much weaker during...

Financial technology (FinTech) companies are increasingly important in the financial system. We investigate the effect of peer-to-peer (P2P) lending on traditional banks' loan losses by examining whether and how P2P lending activity in a state affects loan loss provisions of that state's...

Small and medium-sized enterprises (SMEs) are the backbone of most Asian economies. The main obstacle to the development of the SME sector is the lack of stable finance. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing, and the lack of a...

Financial institutes are the lifeblood of the financial system of any country that plays an intermediary between the surplus and deficit unit of any society. So the efficiency and performance of a financial institution is the indication of sound financial system. In this study the authors are...

We find that Credit Rating Agencies (CRAs) see through transitory shocks to credit risk that stem from transitory shocks to equity prices, while market-based measures of credit risk do not. For a given stock return, CRAs are significantly less likely to downgrade firms with transitory shocks...