Cost Of Loans Research Articles

The effects of disclosure and enforcement on payday lending in Texas

In 2012, Texas and two municipalities therein adopted regulations governing the payday loan market. Austin and Dallas enacted supply restrictions limiting the loan-to-income ratio and mandating amortization. The state adopted an information disclosure inspired by Bertrand and Morse (2011) presenting the cost and typical usage of payday loans in easy-to-understand terms. We find that the municipal restrictions led to a 61% decline in loan volume in Austin and a 44% decline in Dallas, with the effects driven by the start of enforcement. The statewide disclosures led to a persistent 12% decline in loan volume in the first six months.

The influence of earnings management on bank efficiency: the case of frontier markets

Frontier market banks fill key funding gaps in the markets they serve, resulting in increased evaluation (a positive) and earnings management (EM) (a negative). Examination of a large sample of banks in 22 frontier market countries from 2001 to 2018 reveals a downward trend in efficiency, indicating that loan quality issues persist despite increasing economic growth in the respective countries. Using stochastic frontier analysis to quantify efficiency and random effects and truncated regression to investigate the EM-efficiency relation, this study demonstrates that efficiency is negatively associated with EM. Furthermore, there was no clear relationship between bank size and efficiency, which counters economic efficiency theory and implies that frontier market banks absorb higher non-performing loan costs. The findings herein support prospect theory by demonstrating that managers engage in risk-seeking behaviour while making risk-averse decisions. Overall, the study's implications suggest that banks employ alternative loan provision practices to optimise resource allocation and, by extension, performance.

EVALUASI KEBIJAKAN AKUNTANSI BIAYA PINJAMAN ATAS ASET TETAP DI INDONESIA

This study aims to determine the implementation of loan cost accounting policies on fixed assets in food and beverage sub-sector companies in Indonesia. Based on purposive sampling, a sample of 18 companies was obtained. The research data is sourced from the financial statements of food and beverage sub-sector companies listed on the IDX from 2012 to 2019 which were obtained from www.idx.co.id and https://www.idnfinancials.com. This study employs a qualitative method with a content analysis approach and interviews. The content analysis method is used to obtain information on the application of borrowing cost accounting policies on property, plant and equipment and information regarding the disclosure of the amount of capitalized borrowing costs and capitalization rates. In addition, the interview method was carried out as a follow-up to obtain the views of experts to elaborate the results of the content analysis on the disclosure of fixed asset loan cost accounting policies. This study concludes that there are 15 out of 18 companies that do not meet the requirements for disclosure of borrowing costs on fixed assets as regulated in PSAK 26.

Lending in the agricultural sector of Ukraine: challenges and solutions

The promotion of efficient development of productive resources, specific geographic areas, and branches of the economy is the fundamental reference point of the financial and credit policy of the state. In particular, the agricultural sector has certain features of capital formation within the financial system of the state. This is reflected in the requirements and approaches to the development of financial policy by the state and in the corresponding mechanism for its implementation. Being an important tool within this mechanism, lending is aimed at ensuring the economic growth of the agricultural sector. State support facilitated the system of subsidizing loans by providing funds to reduce the cost of loans for farmers in Ukraine, thus encouraging increased productivity in the agricultural sector at the initial stage. However, gradually, this caused a debt agricultural economy that became dependent on the state and started negatively affecting the elimination of structural, intersectoral, and territorial disparities in the agricultural sector. Therefore, the article is relevant, with mentioned issues requiring immediate examination of state credit support to the agricultural sector as well as justification of financial and credit policy of the state with the view of mutually beneficial cooperation between banking institutions and Ukraine’s agricultural sector for stable and efficient development of the latter. The article analyzes the market of bank lending to agricultural enterprises. It also reveals the influence of bank lending on the development of the agricultural sector in Ukraine. The study identifies subjective factors considered as biggest сhallenges for lending to the agricultural sector in Ukraine. The core problems of lending to the agricultural sector in Ukraine are identified in our study, namely: increasing inflation risks; ineffectiveness of economic promotion programs, tightening of the NBU’s monetary policy, underdevelopment of the non-banking financial market, unfavorable conditions in the foreign financial markets. Measures are suggested to solve the problems of lending to the agricultural sector, the essence of which comes down to the development of partnership mechanisms between the state, agricultural enterprises, and banking institutions. А unified regulatory and methodological framework for lending secured by agricultural land should be established. The paper covers European land mortgage lending practices. In Ukraine, they might be adopted by directly raising public funds not only through an authorized state credit institution but also through private credit institutions operating in a market environment.

Optimal Procurement Strategy for Supply Chain with Trade Credit and Backorder under CVaR Criterion

Some capital-constrained and risk-averse retailers may unable to obtain financing from banks due to insufficient collateral and high loan costs, so some retailers tend to use trade credit financing to ease their financial pressure. For the two echelon supply chain composed of a well-funded supplier and a capital-constrained retailer with risk-averse preference, a trade credit strategy model with the supplier-led is established in this paper. By analyzing both parties’ benefits, we derive the model solution and provide optimal decisions to all petitioners. The results obtained in this paper show that the optimum order quantity under the Conditional Value-at-Risk (CVaR) criterion declines w.r.t. the confidence level, and the wholesale price of the supplier increases w.r.t. the confidence level. The reason is that when the retailer makes fewer orders, the supplier will correspondingly increase the wholesale price to maximize their profit. On the other hand, the ordering policy with allowing backorder will make the retailer place fewer orders. Finally, the proposed model is indicated by the given numerical experiments.

Digital Credit in Kenya: A Survey of Costs, Uses and Borrowers Considerations in Relation to Loan Uptake

Digital credit involves use of mobile telephone devices and online platforms to secure short term credit. Digital credit has been on a steady rising trend in Kenya since 2012. Availability of credit by households especially the low-income persons have been of great concern for many years. Digital credit has come in handy to address this concern to a great extent. The main aim of this study was to analyse the cost of digital credit, the uses to which the borrowers apply the digital loans and the factors that they consider before applying for the digital loan in Kenya. The data collection methods used are analysis of secondary data and online surveys. The study analysed the data using paired sample t tests and regression analysis methods. The study observed that there is no significant difference between the cost of digital loans and the banks’ lending rate in Kenya. The findings of this study employment status and loan application have a statistically significant effect on the level of loan uptake. Digital credit users age and loan considerations did not have statistically significant effect on the loan uptake.

DEVELOPMENT OF THE NATIONAL SYSTEM OF MORTGAGE LENDING FOR THE AGRICULTURAL SPHERE

The article considers the problems of mortgage lending to agriculture on the basis of analysis of its current state and the creation of favorable legal and economic conditions for its development. Today there is a low profitability of agriculture and inefficient use of resource potential, as well as lack of long-term financial resources, so solving the problem of attracting long-term investment resources in agro-industrial production is largely associated with the development of mortgage lending in agriculture. The problem of land mortgage lending in Ukraine is the high risk of lending secured by land due to the uncertainty of their liquidity, which is due to the fact that their sale takes much longer than, for example, the sale of an apartment or land allocated for low-rise construction, due to underdeveloped land market infrastructure. World experience shows that land mortgages allow agricultural producers in developed countries, on the one hand, to expand agricultural production through the use of fixed assets acquired through mortgages, and on the other hand, to accelerate capital turnover and earn extra income. The main purpose of creating a national system of mortgage lending is the formation of effective market mechanisms to attract long-term financial resources in the financial and credit sphere. On this basis, the market of long-term mortgage lending will operate with the use of modern market infrastructure and financial instruments that allow to gradually reduce the cost of mortgage loans for agricultural producers. The effective mechanism of implementation of mortgage schemes of crediting of agriculture first of all depends on the effective legislation which should provide, on the one hand, reliable protection, both the mortgage creditor, and the borrower, and on the other hand, to provide incentives for further development and improvement of all complex of legal relations. in this area, taking into account foreign experience. Keywords: bank, mortgage lending, financial instruments, National Bank of Ukraine, loan guarantee fund, liquidity ratio.

Stock price fragility and the cost of bank loans

This study examines whether the flow volatility experienced by institutional investors affects firms’ financing costs. Using Greenwood and Thesmar’s (2011) stock price fragility measure, we find that there is a positive relationship between fragility and firms’ costs of bank loans. This effect is most pronounced when lenders rely more on institutional shareholders to discipline corporate management, or when loans are made by relationship lenders, suggesting that unstable flows could weaken institutional investors’ monitoring effectiveness and strengthen relationship banks’ bargaining power. • Flow volatility experienced by institutional investors affects firms’ financing costs. • Unstable flows affect financing costs by weakening institutional investors’ monitoring effectiveness and strengthening relationship banks’ bargaining power. • Flow volatility also impacts other aspects of the loan contract, such as loan maturity, use of collateral, and use of covenants. • The paper adds to the evidence that non-fundamental risks (institutional investors’ flow shocks) can have a real impact on firms.

The problem of state support and increasing the investment attractiveness of agriculture

Investing in the agricultural sector of the economy largely depends on how quickly the investments made will pay off. Private business, first of all, will invest in the agricultural business in the presence of a low cost and high quality of products. The longer the payback period of the investment, the less likely it is that it will be implemented in practice. Investments are an important source of expanding agricultural production. They enable the agricultural enterprise to carry out technical re-equipment and implement effective environmental and resource-saving technologies. State support for agriculture can consist in the development of transport infrastructure in rural areas, improving the quality of life in rural areas and increasing the labor potential of rural residents. One of the main goals of state support for agriculture is to create favorable conditions for attracting private investors to this industry. Investment activities in agriculture can be focused on improving the fertility of land resources used in agricultural production. The authors consider it expedient to provide the Central Bank with preferential conditions for commercial banks to reduce the cost of loans issued to agricultural enterprises.

Distributional inequality in market-based solar home system programs: Evidence from rural Bangladesh

This paper investigates the effect of borrowing constraints on the pricing of solar home system loans for rural households. We use a unique cross-sectional dataset that includes a sample of 626,761 borrowers’ loan transactions over six years (2013–2018) from the market-based solar home system program in Bangladesh. We estimate that a 10 percent increase in down payment, which we use as a proxy measure for borrowing constraints, reduces the average total cost of the loan by 0.181 percentage points. We also find that highly constrained borrowers pay more than relatively unconstrained borrowers, with average total costs of loans reduced by 0.102 and 0.343 percentage points, respectively, for every 10 percent increase in down payments. The borrowing constraint seems to generate distributional inequality in the pro-poor solar home system program, increasing the financial cost of market participation for these highly constrained borrowers. Constrained borrowers in poor rural areas therefore pay a poverty penalty. We recommend that governments, policymakers, and development donors deploy targeted intervention mechanisms that continue and update financial support for both lenders and borrowers in order to eradicate persistent energy poverty in developing countries.

Industry heterogeneity in the risk-taking channel

We contend that industry heterogeneity in risk and financing has important implications for the passthrough of monetary policy to corporate loan spreads. Existing literature on the risk-taking channel shows that lax monetary policy induces bank risk-taking, and this implies that industries’ risk profiles might induce asymmetries in monetary policy passthrough. Using U.S. syndicated loans over 1984-2018, we examine industry heterogeneity in the potency of the risk-taking channel and assess how this heterogeneity affects firms’ performance. We find that a one percentage point decrease in the shadow rate increases loan cost by approximately 30 basis points in the mining-construction and manufacturing sectors. The effect is lower in the services and transportation-utilities industries, while it is insignificant in the trade and finance sectors. The identified differences in the potency of the risk-taking channel explain a significant part of the inferior firm performance of highly affected sectors in the year after loan origination.

Do investors prefer borrowers from high level of trust cities? Evidence from China’s P2P market

This study explores the effects of trust on individuals’ access to the peer-to-peer (P2P) lending market. We use data collected from the P2P lending market and the China General Social Survey and find that borrowers from cities with high trust have high borrowing success rates, thereby indicating that lenders prefer high social trust. Results in the successful sample indicate that borrowers with high regional trust also receive low loan costs and large loan amounts. Regression of trust and default proves that borrowers from cities with high social trust have minimal default rates, which may be the channel of our conclusion. Results remain unchanged when using slope and river length as instrumental variables. This research further shows that personal heterogeneity, including income level, whether borrowers work in state-owned enterprises or state agencies, and whether the fund is used for development purposes, affects the impact of social trust. In addition, the conclusions continue to be robust after replacing the explanatory variable, control variable, and sample. Finally, this study determines that fairness plays a consistent role with trust, but happiness plays an opposite role.

Local product market competition and bank loans

We investigate the influences of local product market competition on the cost of private debt. Our evidence suggests that the cost of bank loans is significantly higher for firms headquartered in states with greater local product market competition measured by the Herfindahl-Hirschman Index for resident industries. To establish causality, we examine the recognition of the Inevitable Disclosure Doctrine and firm relocations to identify exogenous shocks to local product market competition. We find that the cost of bank loans is lower for firms facing less intense local product market competition after the adoption of IDD and higher for firms relocated to states with more competitive product markets. The results imply that banks value the characteristics of a firm's local product market when approving loan contracts.

Does local legal environment matter in the online credit market?

The physical distance and fragile relationship between online debtors and online creditors make legal enforcement less intimidating; therefore, the role of the legal environment in the online credit market is a topic worth investigating. This paper employs an online lending platform and uses loan-level data to investigate the local legal environment’s effect in the online credit market. We find that a favorable legal environment can motivate online debtors’ integrity, improve online debtors’ credit availability and reduce online debtors’ loan costs, implying the positive externalities of the legal environment’s progress. Finally, we confirm that online debtors with lower income and large loan amounts benefit more from the legal environment’s progress. Our finding indicates that even though fintech has profoundly changed the organizational form and transaction mode of financial institutions, the legal environment still plays an essential role in promoting inclusive finance.

Non‐Market Strategies and Credit Benefits: Unpacking Heterogeneous Political Connections in Response to Government Anti‐Corruption Initiatives

AbstractThis paper explores how political connections influence firms’ credit benefits, especially when the political environment improves. The authors distinguish two types of political connections – connections to government officials and connections to council deputies – according to whether the political benefits they provide are exclusive and definite. Employing a panel data set comprised of Chinese listed firms’ bank‐loan contracts from 2008 to 2014, they find politically connected firms – and particularly firms with connections to government officials – enjoy significantly lower loan costs than their non‐connected counterparts. Moreover, they find that anti‐corruption efforts, which reflect improvement in the political environment, reduce the credit benefits of political connections, but only for firms that have connections to government officials. Results emphasize the value of unpacking the heterogeneity of political connections and illuminate the importance of more complete assessment of corporate political strategies in changing political environments.

Debt maturity dispersion and the cost of bank loans

This paper examines the relation between corporate debt maturity dispersion and the pricing and terms of bank loans. Analyzing a sample of U.S. bank loans from 2002 to 2016, we find that firms with a dispersed debt maturity structure pay a lower interest rate. The rate-reduction effect is significant only for firms without a credit rating. For these firms, spreading debt maturity dates also results in lower commitment fees, fewer covenant restrictions, and less collateral in their loan contracts. The impact of debt maturity dispersion on the pricing and structure of bank loans is stronger when borrowers have higher rollover risk or when the need for monitoring is greater. Our results suggest that dispersion in debt maturity structure mitigates the agency problem associated with shareholder–creditor conflicts by reducing rollover risk and alleviating the need for monitoring, which results in borrowers receiving more favorable terms in loan contracts.

Analysis on the Financing Dilemma and Countermeasures of China's Small, Medium and Micro Enterprises in the Information Age

Expand financing channels for small, medium and micro enterprises, reduce loan costs, solve financing data matching, and improve financing efficiency. Analyze P2P financing model, e-commerce microfinance financing model, and online crowdfunding model. To a certain extent, the problems of narrow financing channels, high costs, high risks, and difficulty in applying for small, medium and micro enterprises have been alleviated. Using the ever-changing Internet technology to innovate the "Internet +" financing model, overcome the financing difficulties caused by insufficient government attention, discrimination in bank target selection, and the relatively small size of the enterprise itself, expand financing channels, and improve financing efficiency, Enabling small, medium and micro enterprises to get out of the “embarrassed” situation in which development is hindered by financing difficulties.

Corporate Bond Financing and Labor Income Share

The growth of residents’ income plays an important role in promoting the sustainable development of Chinese economy. And increasing labor income share is an important mechanism to improve residents’ income and distribute benefits from economic development. Previous studies have shown that the decline of labor income share will have a negative impact on the macro-economy, resulting in the deterioration of income distribution pattern, low consumption level and imbalance of economic structure. In particular, combined with the characteristics of China’s super large-scale market and potential advantages of domestic demand, the central government proposes to build a new development pattern with “large domestic circulation as the main body”. In this context, it is of great theoretical and practical significance to explore how to increase labor income share for expanding domestic demand, reviving the economy, and realizing the long-term equilibrium of stable growth and risk prevention.Based on the data of A-share listed companies from 2003 to 2019, this paper finds that there is a significant positive correlation between bond financing and labor income share. In addition, after using the PSM-DID model, regression following Rajan and Zingales（1998）, controlling high-order fixed effect, 2SLS regression based on instrumental variables and exogenous shock based on short-term financing bond, the conclusion is still robust. Further research shows that:（1）Bond financing increases labor income share by reducing the overall debt cost. And it has a spillover effect on bank loans, that is, bond financing can promote labor income share by reducing the interest rate of bank loans.（2）The effect of different types of bonds on labor income share is heterogeneous, and the convenience of bond issuance is an important factor affecting labor income share.（3）The competitive hypothesis of “wage erodes profit” does not affect our findings.The contributions of this paper are as follows: Firstly, existing literature finds that financial development and enterprise debt level have an important impact on labor income share. However, the literature focusing on financial development mainly discusses the relationship between the expansion of banking sectors and the development of stock market and labor income share, ignoring the impact of bond market. Moreover, the literature finds that debt level can affect labor income share by influencing bargaining power in the process of negotiation between enterprises and workers. This study examines whether and how the debt structure affects labor income share based on the assumption of a certain level of debt. Therefore, it broadens the understanding of the determinants of labor income share.Secondly, previous studies mainly discuss the economic consequences of bond financing from the perspectives of earnings management, accounting conservatism, social financing cost, bank loan cost, corporate innovation, and cash dividend policy. However, these studies mainly focus on the relationship between bond financing and accounting information quality and investment behavior. This study extends the research on the economic consequences of bond financing from the perspective of distribution effect focusing on labor income share.Thirdly, this paper reveals the mechanism of bond financing affecting labor income share. That is, bond financing can reduce the financial burden of enterprises by reducing the overall cost of debt financing, and then increase labor income share; moreover, bond financing has a spillover effect on bank loans, which means it can promote labor income share by reducing the interest rate of bank loans.

Spread Decision of Total Loan Cost in Real Estate Provident Fund - Focus on Nonbanking PF Loans -

Spread Decision of Total Loan Cost in Real Estate Provident Fund - Focus on Nonbanking PF Loans -

THE LENDING OF AGRICULTURAL PRODUCERS IN UKRAINE

The purpose of the paper is to analyze and study the issues of lending to agricultural producers in Ukraine. Methodology. General scientific economic and mathematical methods as analysis, synthesis, abstraction, concretization, and special methods as comparison, tabular were used. Results of the study have shown that banks are actively involved in lending to agricultural producers, including microcredit. The volumes of short-term loans of banks of agricultural enterprises, including small and micro enterprises during 2013-2018 were studied. The rating of domestic banks that offer the most favorable lending conditions for agricultural enterprises is also studied. It is determined that the microcredit mechanism, presented in Ukraine as the support for small business, was first mentioned in the Procedure for using funds provided in the State Budget for 2004 for financial support of farms through the microcredit mechanism of March 17, 2004, No. 325. Currently, such support regarding the partial compensation of interest on loans from commercial banks and the reduction in the cost of loans also exists. The procedure for lending to agricultural enterprises in 2018 and 2019 is analyzed. In particular, the number of agricultural enterprises, which attracted soft loans in 2015-2018 and the volume of soft loans, attracted by agricultural enterprises in this period, were estimated. Practical implications. Factors, that hinder the development of microcredit in Ukraine, have been identified. The basic directions of the further development of microcredit of subjects of small agrarian business are defined. It is determined, that the microcredit market provides conditions for stable development of the domestic economy, and the result of the use of microcredit should be the development of production aimed at priority sectors of the economy, including agriculture, the production of competitive products, and providing high-quality services.