Huajing Hu, Yili Lian and Chih-Huei Su
The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.
Abstract
Purpose
The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.
Design/methodology/approach
The authors mainly work on evaluating first, whether prior lending relationships affect corporate cash holdings? and second, whether the cash flow sensitivity of cash varies systemically with lending relationships. Three different ways are used to define lending relationships, including the lending relationship dummy, a firm’s maximum relationship intensity in terms of number of deals across all lenders and a firm’s maximum relationship intensity in terms of dollar amounts across all lenders. In addition, the paper applies two-stage least squares (2SLS) to address the concern of endogeneity between firms’ liquidity management and banking relationships.
Findings
The authors find that firms with lending relationships maintain a lower level of cash holdings and save less cash out of cash flow. Furthermore, the effect of lending relationships is more profound for firms with high cash flow. The results suggest that prior lending relations alleviate information asymmetry, lower the cost of capital and therefore affect firms’ propensity to retain cash and maintain a high level of cash holdings.
Research limitations/implications
This paper contributes to both the liquidity management literature and the literature on the value of maintaining lending relationships with banks. Researchers should take into consideration the lending relationships built over the course of the lending when assessing firms’ cash policies.
Social implications
Bank lending relationship mitigates the information asymmetry problem, one type of market friction, and facilitates firms’ future external financing, thereby affecting firms’ cash policies and giving more flexibility in liquidity management. The value of lending relationships distinguishes bank loans from public bonds. Therefore, firms, especially those facing more information asymmetry issue, should take into account the benefits from lending relationships in their future debt financing.
Originality/value
Extant literature examines how firm characteristics affect firms’ cash holdings. This paper introduces a new factor that could explain corporate cash policy.
Details
Keywords
The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations.
Abstract
Purpose
The purpose of this study is to examine the effect of bank interventions on bond performance in relation to loan covenant violations.
Design/methodology/approach
This paper tests the following questions: do bondholders receive benefits from bank interventions? Is bond performance related to the probability of bank interventions? Is the turnover of a chief executive officer (CEO) associated with bank interventions and bond performance? Abnormal bond returns, the difference between bond returns and matched bond index returns are used to measure bond performance. An estimated outstanding loan balance is used to measure the probability of bank interventions. CEO turnover is identified from proxy statements and categorized into forced and voluntary CEO turnovers. Event studies and regression analysis were used to answer the above research questions.
Findings
This paper finds that both short-term and long-term bond returns increase after covenant violations, bond performance is positively related to the probability of bank interventions, forced CEO turnovers are positively associated with the probability of bank interventions and firms with forced CEO turnovers tend to have superior bond performance.
Originality/value
This paper is the first to explore the relation between bank interventions and bond performance.
Details
Keywords
Huajing Hu and Yili Lian
– The purpose of this paper is to investigate the impact of institutional investors on the cost of bank loans using US bank loan data from 1995 to 2012.
Abstract
Purpose
The purpose of this paper is to investigate the impact of institutional investors on the cost of bank loans using US bank loan data from 1995 to 2012.
Design/methodology/approach
The cost of bank loans is analyzed with regard to loan spreads, collateral requirements, and the number of prepayment covenants.
Findings
This paper finds that, first, holding institutional ownership constant, institutional control is positively related to the cost of bank loans, implying that strong institutional control intensifies conflicts between large shareholders and lenders. Second, institutional holdings are negatively related to the cost of bank loans. These results indicate that institutional monitoring reduces the agency problem between shareholders and managers.
Originality/value
This paper suggests that the trade-off between institutional monitoring and institutional control jointly determines the effect of institutional investors on the cost of bank loans. Moreover, lenders should consider large shareholders and their influence when making lending decisions.
Details
Keywords
Yingwei Liu, Tao Wang, Ling Zhou and Chunyan Nie
The essence of “Chinese element” has been pinpointed as the representation of national cultural archetype resource of China, which reflects to the overall power enhancement of…
Abstract
Purpose
The essence of “Chinese element” has been pinpointed as the representation of national cultural archetype resource of China, which reflects to the overall power enhancement of China. Applying the Chinese national cultural archetype resource, which will be used for promoting the Chinese Brand internationalization, aims for the consumers' approval with the hope of integrating and spreading the unique cultural advantage of Chinese brand. The recognizing of Chinese brand's cultural archetype in this paper has constituted the basis of Chinese brand's cultural archetype strategy.
Design/methodology/approach
Based on the Grounded Theory, this paper has collected and analyzed the value symbols, character images and theme stories of Chinese narrative advertisements and constructed the cultural archetype framework of Chinese brands. This paper makes a comprehensive application of Charmaz's constructivist analysis and the main axis analysis and inspection method advocated by Strauss, with the aim of building a more objective and systematic theoretical framework for the Chinese brand cultural archetype.
Findings
In this framework, it revealed: (1) Chinese brand's cultural archetype can be divided into 12 concrete archetypes according to individual's relationship with self, the other, community and nature; (2) Consumers' different ways of self-categorization are attributed as the essential difference among various archetypes. This paper also compared and analyzed the differences between Chinese and Western cultural archetypes from three perspectives, formation of social structure, pedigree of myth and character's feature.
Originality/value
This paper has certain innovative significance to the theoretical construction of the archetype of Chinese brand culture. First, based on the cultural perspective, this paper applied the cultural psychological connotation of archetype to the brand research across culture, which is more conducive to the researchers' investigation of the cultural psychology of consumers in the cross-cultural context? Second, based on the identification and comparative study of Chinese brand culture archetype, it provides a new expansion and supplement for the research on brand internationalization and globalization in emerging countries.