Performance-sensitive debt - the intertwined effects of performance measurement and pricing grid asymmetry : [This version: September 8, 2014]
- This paper studies the use of performance pricing (PP) provisions in debt contracts and compares accounting-based with rating-based pricing designs. We find that rating-based provisions are used by volatile-growth borrowers and allow for stronger spread increases over the credit period. Accounting-based provisions are employed by opaque-growth borrowers and stipulate stronger spread reductions. Further, a higher spread-increase potential in rating-based contracts lowers the spread at the loan’s inception and improves the borrower’s performance later on. In contrast, a higher spread-decrease potential in accounting-based contracts lowers the initial spread and raises the borrower’s leverage afterwards. The evidence indicates that rating-based contracts are indeed employed for different reasons than accounting-based contracts: the former to signal a borrower’s quality, the latter to mitigate investment inefficiencies.
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| Verfasserangaben: | Christina E. BannierORCiDGND, Markus Wiemann |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-351088 |
| URL: | http://ssrn.com/abstract=2507707 |
| DOI: | https://doi.org/10.2139/ssrn.2507707 |
| Titel des übergeordneten Werkes (Englisch): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 476 |
| Schriftenreihe (Bandnummer): | CFS working paper series (476) |
| Verlag: | Center for Financial Studies |
| Verlagsort: | Frankfurt, M. |
| Dokumentart: | Arbeitspapier |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2014 |
| Jahr der Erstveröffentlichung: | 2014 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 20.10.2014 |
| Freies Schlagwort / Tag: | accounting data; collateral; credit ratings; performance pricing; performance-sensitive debt; underinvestment |
| Ausgabe / Heft: | September 8, 2014 |
| Seitenzahl: | 44 |
| HeBIS-PPN: | 351156828 |
| Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
