This paper investigates the determining factors of bank monitoring in small business lending. Unlike previous studies that have relied on proxies of a bank's monitoring effort, we use a large and unique data set that includes the number of monitoring contacts per year between a European bank and...

Firms choose debt structure and competing banks choose monitoring intensity. Monitoring improves credit allocation, but creates informational lock-in effects in bank-borrower relationships. In a competitive credit market, banks dissipate anticipated profit from serving locked-in borrowers...

We develop a double moral hazard model that predicts that the use of project finance increases with both the political risk of the country in which the project is located and the influence of the lender over this political risk exposure. In contrast, the use of project finance should decrease as...

This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We use administrative data covering the period from June 2011 to April 2014...

In the syndicated loan market, potential accounting errors exacerbate credit risk and asymmetric information problems. The purpose of financial statement audits is to provide reasonable assurance that accounting records are free from material errors. In this paper, we examine whether an increase...

I explore a sample of private bank loan agreements collected from LPC Dealscan and empirically test the marginal effect of covenants inclusion on loan spread, conditioning on the extent of information asymmetry between the firms and the lead banks. I apply two measures of covenants inclusion,...

This study uses covenant violations to provide evidence on how firms make disclosure decisions in the presence of enhanced bank monitoring. Using a regression discontinuity design, I find that firms reduce disclosure following covenant violations. A series of analyses suggest that part of this...

We provide causal evidence that adverse capital shocks to banks affect their borrowers' performance negatively. We use an exogenous shock to the U.S. banking system during the Russian crisis of Fall 1998 to separate the effect of borrowers' demand of credit from the supply of credit by the...