Abstract
This study aims to analyze the effect of credit rating, discretionary accrual, and financial distress on credit facilities, namely the rate spread, credit collateral, and maturity date extended by banks. This study uses static panel equations and panel data, consisting of 50 manufacturing companies in Indonesia from 2010 to 2017. The research methods used are the Pooled Least Square (PLS), Fixed Effect Model (FEM), Random Effect Model (REM), and logit panels. This study concludes that earnings management has a negative and insignificant impact on the rate spread and maturity date but positively and significantly affects the collateral variable. Financial distress has a positive and insignificant effect on the rate spread and maturity date but negatively impacts the collateral variable. The company's investment rating has a negative and insignificant impact on the three dependent variables, namely, rate spread, collateral, and maturity date.Keywords: credit rating, discretionary accrual, financial distress, credit facilitiesJEL Classification: C23, G21, G24
Highlights
The bank is an intermediary financial institution that focuses on fundraising and channel funds to the public (Kadang, 2018)
Loans extended by banks can boost economic growth in various countries, including Nigeria (Akpansung & Bababola, 2011) and Indonesia (Sipahutar et al, 2016)
This study shows that the results of companies that have an investment rating are guaranteed lower bank credit than companies that do not have an investment rating
Summary
The bank is an intermediary financial institution that focuses on fundraising and channel funds to the public (Kadang, 2018). The main activity of banks in extending credit to the public has a strategic role. Providing credit to the public can encourage economic growth through capital accumulation and increasing company productivity (Demirgüç-Kunt & Levine, 2004). Loans extended by banks can boost economic growth in various countries, including Nigeria (Akpansung & Bababola, 2011) and Indonesia (Sipahutar et al, 2016). Sassi & Gasmi (2014) prove that not all bank loans positively impact economic growth. Consumption credit extended to households had a negative impact on economic growth in Europe during the 1995-2012 period. Credit which played an essential role in stimulating economic growth in Europe during this period, was business credit. Similar research was conducted (Raz, 2017), which shows that bank credit can boost Indonesia’s economy is the type of business credit
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