Lending relationships when creditors are in control
By Jan Keil
Journal of Corporate Finance | April 2023
DOI
doi.org/10.1016/j.jcorpfin.2023.102363
Citation
Keil, Jan. Lending relationships when creditors are in control Journal of Corporate Finance doi.org/10.1016/j.jcorpfin.2023.102363.
Copyright
Journal of Corporate Finance, 2023
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Abstract
Violations of financial covenants shift control rights to lenders. When borrowers have lending relationships with these lenders in control, they experience not only smaller declines in investment, but also lesser deteriorations in both firm survival probabilities and in sales. These effects are largely driven by opaque borrowers without any credit ratings. They are present where lending relationships existed already before loan issuance (ex-ante), but also where a contractual relationship without pre-issuance interaction is more mature (ex-post). Surprisingly, there is no evidence of any “dark side” of lending relationships when creditors are in control, such as an increase in interest expenses or a lesser degree of financial discipline.

Jan Keil is an Assistant Professor of Finance at the Indian School of Business (ISB). His research focuses on disruptive and technology-driven change in financial intermediation, including payments, banking, consumer finance, and money. One current project explores the geopolitical motivations behind central bank digital currencies and their effect on payment firms (revised and resubmitted to the Journal of Finance). Another project analyses the economics of buy-now-pay-later (BNPL) for e-commerce merchants (revised and resubmitted to the Journal of Financial Economics).

Professor Keil has published in the Journal of Financial and Quantitative Analysis and served as a referee for the Review of Financial Studies. He has worked with Manju Puri, Tobias Berg, Thorsten Beck, and Steven Ongena.

He has received research grants from the German National Science Foundation (DFG) and the University of Zurich. Prior to joining ISB, he was affiliated with Humboldt University in Berlin and the University of the West Indies in Kingston, Jamaica. Professor Keil holds a PhD in Economics from the New School for Social Research, New York, and an MA-equivalent diploma in Political Science from Goethe University, Frankfurt.

Jan Keil
Jan Keil