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Firm Size Dependence in the Determinants of Bank Term Loan Maturity
Author(s) -
Dennis Steven A.,
Sharpe Ian G.
Publication year - 2005
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2005.00587.x
Subject(s) - loan , web syndication , maturity (psychological) , monetary economics , business , liberian dollar , term loan , economics , participation loan , non conforming loan , fixed interest rate loan , financial system , finance , non performing loan , venture capital , psychology , developmental psychology
We examine the hypothesis that firm size affects the sensitivity of bank term loan maturity to its underlying determinants. As borrower size increases, negotiating power with the lender and information transparency increase, while the lender is able to spread the fixed costs of loan production across a larger dollar value of the loan. We find strong evidence of firm size dependency in the determinants of bank term loan maturity and show that this is unrelated to syndication. Only large borrowers can manipulate bank loan contract terms so as to increase firm value.