Cost Of Loans Research Articles

AN EMPIRICAL ANALYSIS OF CAUSATIVE EFFECT OF LINGERING NAIRA DEVALUATION ON NIGERIAN ECONOMY

This study focused on the effect of the inflationary trend caused by persistent loss of value of Naira on the Economic growth and foreign exchange market in Nigeria. The study adopted quantitative research design. Data for this study were of secondary sources obtained from the Statistical Bulletin of Central Bank of Nigeria. Data collected were analysed using multiple regression. The result of the study revealed that inflation negatively affects the GDP. The loan cost on the other hand positively affects the GDP. Also, exchange receptiveness negatively affects the GDP. The study affirmed economic literature; highlighted the link between the exchange rate volatility and economic performance in Nigeria considering gross domestic product as an exponent of economic performance, thus the need to quantify the link between gross domestic product and exchange rate volatility emerges. The study suggests further diversification of the economy: an expansion in non-oil exports, adoption of measures to stimulate domestic production of essential household goods, and also encourage export of primary commodities in which the country has comparative advantage. A strong demand management of exchange rates through restrictive monetary and fiscal policies to ensure that growth of aggregate demand is compatible with a low and stable inflation is recommended. The study also recommended an adoption of a realistic exchange rate policy for naira best capable of restricting excessive demand for foreign exchange.

Dynamic web-based GIS tool for pre-feasibility evaluation of renewable energy projects

The high energy consumption and the large amount of emissions associated with roads life cycle makes it necessary for the administrations involved to invest in the implementation of renewable energy technologies on adjacent lands so that the net balance between CO2 emitted and CO2 saved is zero, thus helping to decarbonize the transport networks. To facilitate the first step in the long process leading up to the construction of wind and solar farms, a user-friendly tool is here presented that allows an early-stage evaluation of renewable energy projects. The ENROAD web-based GIS tool, through a functional, modern, intuitive, and ergonomic graphical user interface aimed at non-specialized users, optimizes the use of photovoltaic and wind technologies based on shading and wake losses, respectively, taking into account the solar radiation and wind conditions of the location and the geometry of the area selected by the user. In addition, the tool provides a thorough financial analysis, incorporating the effects of user-defined long-term interest rates, inflation rates, loan costs and efficiency losses on the Levelized Cost of Energy as well as traditional financial metrics, enabling users to conduct insightful if-then simulations. While this tool cannot have the precision of the in-depth study needed for the design of complex renewable energy facilities, it can facilitate the decision making by the administrations. Finally, a case study and a validation section have been included to demonstrate the technical and financial evaluation provided by ENROAD and ensure that the results provided are reasonable and accurate enough.

Interest rate liberalization and corporate innovation: Evidence from natural experiments in China

AbstractWe examine whether and how interest rate liberalization affects corporate innovation in China. Using the removal of the interest rate ceiling and floor as exogenous shocks, and the numbers of granted patents to proxy for corporate innovation, we find that corporate innovation increases after interest rate liberalization. Our finding holds through several robustness tests. Furthermore, we show that state‐owned enterprises (SOEs) and non‐SOEs benefit from interest rate liberalization differently: Non‐SOEs benefit more from interest rate ceiling removal, whereas SOEs benefit more from interest rate floor removal. Cross‐sectional analyses also show that the effect is more pronounced when bank competition is higher and when firms rely more on external finance. Exploring potential channels through which interest rate liberalization spurs innovation, we find that although ceiling removal mitigates firms’ financial constraints, floor removal lowers corporate loan costs. Our study provides evidence of how financial reform benefits the real economy.

The imprint effect of initial institutional environments and bank financing in family businesses

The initial imprint embedded in family business origin provides us with favorable support for identifying how past institutional environments and then current governance characteristics influence financing. This study investigates the influence of family business origin on loan borrowing, and finds that restructured family firms (RFFs), which are formed through the restructuring of collective-ownership enterprises, are likely to obtain more loans compared to entrepreneurial counterparts (EFFs). The effect varies with local marketization, family control rights, and intergenerational succession. Our findings suggest that restructured family firms have a sounder modern enterprise system, less information asymmetry, and consequently pose less credit risk, which allows them to access loans more easily. In addition, institutional differences stemming from the origin of the firms affect the composition and cost of bank financing. RFFs outperform EFFs in terms of the size of non-local bank loans and the cost of loans. Overall, this study shows that the institutional environment of family firms at the founding stage has a long-term impact on future financing.

Supply chain vertical common ownership and cost of loans

This study explores how vertical common ownership reduces supply chain risk and influences creditors' decisions, focusing on the cost of loans. Findings reveal that creditors view such firms as less likely to default, evidenced by lower loan spreads. This effect is stronger for suppliers with more relationship-specific investments, weaker bargaining power, higher information asymmetry, and long-term common institutional ownership. Results remain robust through quasi-natural experiments from financial institutions' M&As, supplier-customer pair analyses, etc. We also compare vertical common ownership with the horizontal one and demonstrate its incremental contributions. Moreover, the fraction of customer sales and the institutional investors' share ownership likely influence the likelihood of vertical common ownership, with our results consistently holding under Heckman analysis. Overall, the results suggest that vertical common ownership enhances coordination and monitoring, reducing risks and creditor risk premiums. The findings may offer valuable insights into managing supply chain risks and understanding their financial implications.

Small and medium-sized enterprises and sustainable transition: Role of FinTech in a country's banking ecosystem

During the sustainable transition, small and medium-sized enterprises (SMEs) request funding to support environmental, social, and governance (ESG) investments. In particular, these requests clash with information asymmetries typical of the bank–firm relationship, causing SMEs to experience credit crunch phenomena or increased loan costs. This aforementioned phenomenon prompted this study to examine whether FinTech increases banks’ ability to support the development of SMEs aimed at achieving ESG or, better yet, sustainable transition goals. The results suggest that FinTech in a country’s banking ecosystem improves the ESG performance of Italian and British SMEs by addressing adverse selection and moral hazard issues. This study also shows a more pronounced effect in the UK banking ecosystem, which has a higher level of FinTech development and diffusion.

Gambling preference, information risk, and the pricing of bank loans

ABSTRACT Our study explores the effect of local gambling preferences (LGP) on bank loan pricing, revealing that lenders impose significantly higher interest rates on firms situated in areas characterized by stronger gambling tendencies. Our results remain robust after conducting a series of sensitivity tests that account for firm-, county-, and loan-specific attributes, as well as several identification robustness checks. Specifically, our relocation analysis shows that firms moving to areas with higher (lower) gambling preferences experience higher (lower) costs of bank loans compared to control groups. Our channel analysis further reveals that local gambling preferences exacerbate a firm's information risk environment, as captured by poorer earnings quality, heightened earnings risk, and greater managerial concealment of bad news, resulting in higher borrowing costs. Finally, we observe that firms in areas with higher LGP encounter more stringent non-price loan terms. However, institutional ownership and the threat of takeovers significantly mitigate the adverse effect of LGP on bank loan pricing.

Analyzing the Impact of Cost of Funds and Non-Performing Loans on Bank Profitability

The research was conducted to see how cost of funds (COC), and non-performing loans (NPL) on profitability is measured by return on assets (ROA). The research method used is descriptive and verification methods. Secondary data is sourced from Regional Development Banks of West Java and Banten Provinces in Indonesia quarterly financial reports for 2014 – 2022, while the data analysis technique uses multiple linear regression analysis. The results of the research are that COF and NPL has a negative and significant effect on ROA. Simultaneously, COF and NPL have a significant effect on ROA. The results of this research are useful for bank management in determining funding strategies with low cost of funds, and credit management strategies so that non-performing remains healthy.

Strain sebagai pendorong mahasiswa menggunakan pinjol ilegal: Analisis viktimisasi mahasiswa korban pinjol ilegal

Background: The cases range from socialization that requires students to participate in using online loans, to murders with the motive of paying for online loans. Illegal online loans cases continue to push the urgency of research that analyzes why many students become users of illegal online loans. Findings: Although the number of students using illegal online loans continues to increase, the victimization experience of students using illegal online loans is still very little researched. Student status places someone as an academic, someone who is highly educated and has critical and analytical thinking skills. Methods: This study uses a critical criminology method with the use of a qualitative approach to produce strain analysis. This study uses data mining with a qualitative approach with a structured interview methodology. This study also found that the impact of illegal online loans on students is very disruptive to their lives on a large scale and in the long term. Conclusion: Students experience losses from the burden of illegal online loan costs which are very large because financial exploitation through interest and hidden fees is very large due to their limited financial capabilities. The magnitude of financial losses from illegal online loans greatly disrupts students' academic lives. Many students have to drop out of college due to limited funds or because they have to focus on finding income to cover the financial losses from illegal online loan exploitation. The terror, intimidation, threats, and violence experienced by students disrupt their mental and physical health. Students have to live in conditions without security for a long period of time when they become users of illegal online loans. Many students who are victims of illegal online loans suffer from mental disorders that interfere with their ability to live their lives. Long-term student recovery requires psychiatric care that takes a lot of effort, time, and money.

Symmetric and Asymmetric Effects of Attitude and Satisfaction on Sustainable Business Growth

Microfinance plays a crucial role in fostering economic development, especially in underserved and impoverished communities. Using stimulus-organism-response (SOR) theory, the study investigates how microfinance, cost of loan, and individual funding and support affect borrowers' business attitudes and sustainable business growth, as well as the impact of satisfaction with these sources. The study collected 845 data points from the Khulan division of Bangladesh using a convenient sampling technique and analyzed them with Smrt Pls 4 and fsQCA 3 software. The results indicated that microfinance, cost of loan individual finding, and support significantly affect borrowers’ business attitudes which in turn has a positive effect on sustainable business growth. The findings further show that apart from the relationship between microbusiness and business attitudes, business satisfaction does not moderate the relationships between cost of loan and business satisfaction as well as individual finding and support and business satisfaction. The study suggests insightful recommendations for academics, MFIs, and policymakers for poverty reduction through ensuring sustainable business conducted by microfinance. This study introduces two new concepts i.e., individual funding and support and business satisfaction as well as a new theory i.e., SOR in microfinance research, extending the theory's applicability, and research scope, and providing new suggestions for further research.

Credit risk correlation and the cost of bank loans

Credit risk correlation and the cost of bank loans

Firm‐level political risk and bank loan contracting

AbstractWe investigate the impact of firm‐level political risk on loan contracting. We find that firm‐level political risk is positively associated with bank loan cost and that this effect is stronger for firms experiencing increased operational uncertainty and higher default risks. Firm‐level political risk also leads to more unfavorable non‐pricing loan terms. To alleviate endogeneity concerns, we use an instrumental variable approach and placebo tests. We further find that political connections and relationship‐based borrowing can attenuate the adverse effect of firm‐level political risk on loan contracting.

Corporate noncompliance: Do corporate violations affect bank loan contracting?

We examine the effect of corporate violations on bank loan contracting and document that borrowers with higher corporate violation penalties have higher loan costs. Higher corporate violations are also associated with more restrictive covenants and a higher likelihood of a collateral requirement. The increasing effect of corporate violations on loan costs is concentrated in opaque firms or those subject to more competitive markets or ineffective monitoring. Firms with higher violation penalties have lower future performance and a higher number of future violations. Overall, our results demonstrate that banks factor corporate violations into their lending decisions, thus shedding new light on the economic consequences of corporate violations through the creditors’ lens.

When shareholders cross-hold lenders’ equity: The effects on the costs of bank loans

We show that syndicated loan spreads are lower as borrowers’ shareholders cross-hold more lenders’ equity. Apart from controlling for borrower and lender fixed effects and various other ownership measures, we address endogeneity concerns by conducting a difference-in-differences analysis exploiting the mergers of institutional investors. Additional tests on cross-holding shareholders’ holding period, the impact of active cross-holders, subsamples of borrowers subject to different degrees of shareholder–creditor conflicts, changes in borrower risk around loan initiation, and the number of financial covenants provide support for the hypothesis that borrower shareholders’ equity holdings of lenders reduce agency costs of debt.

Intermediary frictions and convertible bond pricing

Buy-and-hedge intermediaries are important investors in the convertible bond market as they intermediate between firms that require capital quickly and investors requiring time to assess the security. Their strategy requires them to manage the trade-offs involved with the costs and benefits of hedging. We find that prices of convertible securities reflect the costs that intermediaries incur when managing their positions. Especially cross-sectional and within-bond variation of intermediaries’ loan costs helps explain variation in convertible bond underpricing.

Betting the farm: Rural illiberal State-building in Angola via Chinese loans

Abstract Angola’s government has historically championed the revival of the agricultural sector as a national priority, though it has remained unclear what role the nation’s peasantry is intended to play. Looking to the future while fixated on the past, the first failed recipe for growth was initially based on nationalizing the colonial export model by incorporating the social and economic forces of the rural economy. The government’s early embrace of authoritarian modernization has since pursued an illiberal rural development model seeking to entrench the state’s control over rural areas and extend elite reproduction capacities, exercised principally through a series of state-owned enterprises. Upon the end of the civil war in Angola in 2002, the timely arrival of Chinese loans and technical assistance allowed the administration of President José Eduardo dos Santos to revitalize this strategy with a return to the establishment of a series of state agro-industrial farms a quarter century later. A historical presidential transition in 2017 upended these strategies of rural governance, leading to a vast privatization scheme of state assets built up over decades. This article reveals how the Angolan state has historically sought to engineer elite minority control over the agricultural sector while marginalizing the vast majority of the main rural economic actor, the peasantry. Likewise, the case study provides insight into the hidden costs of Chinese loans on Angola’s rural economy.

Діагностика та оцінка впливу фінансово-економічних криз на розвиток банківської системи України

The aim of the article is to develop the theoretical foundations for diagnosing and assessing the impact of financial and economic crises on the stability of functioning of the banking system of Ukraine. The article identifies the main financial and economic crises from 1998 to 2022, as well as assesses the consequences of their impact on the banking system of Ukraine. The main causes of financial and economic crises have been systematized, it has been found that an effective instrument for counteracting the consequences of financial and economic crises on the banking system of Ukraine is the introduction by the National Bank of Ukraine of the inflation targeting regime to maintain the stability of the Hryvnia. The dynamics of changes in the NBU discount rate for 2014–2023 is studied and the NBU’s application of restrictive policy measures in 2015, 2018 and 2022, as well as expansionary policy measures in 2020 to financially stabilize the banking system is verified. It is proved that changes in the NBU discount rate directly affect the cost of loans and deposits. The structure is assessed and the balance of payments of the country for 2015–2022 is calculated, the excess of imports over exports is determined, also determined is the existing deficit of the balance of payments, which leads to a decrease in the country’s foreign exchange reserves, the outflow of currency from the country and the devaluation of the Hryvnia in general. It is proved that during the periods of financial and economic crises there is an increase in the profitability of the NBU. An assessment of the indicators of financial stability of the banking system has been provided and the main trends in their changes over the past five years have been diagnosed (currency exchange rate stability, structure of banking resources, financial results of banks and their compliance with prudential standards, settlements of the NBU with the State Budget of Ukraine, obligations to the IMF, business activity, financial stability, liquidity, solvency of banks, etc.). The article identifies and substantiates the key problems of functioning and development of the banking system of Ukraine, taking into account the destructive consequences of financial and economic crises, also further prospects for research on the chosen topic of scientific work are outlined.

The Spillover of Corporate ES on Bank Loan Cost

The Spillover of Corporate ES on Bank Loan Cost

Sources of financing Islamic commercial banks rise from benefits, costs, opportunities and risks through Sukuk issuance

The purpose of this study is to pinpoint many elements that support Sharia Commercial Banks (BUS) in expanding their funding sources. Small capital and limited industrial and individual bank scale are among the problems facing sharia banking, according to the 2015–2019 Sharia Banking Roadmap Guidelines. Out of the 13 BUS, only one fell into the BUKU 3 category (capital IDR 5-30 trillion) in terms of capital as of December 2016. Compared to conventional banks, which have 32,730 office units, Islamic banks only have 2,201 office units. This makes it harder for sharia banks to collect deposits from the general population. This suggests that there are funding source issues for Islamic banking as well. Due to a lack of funding, the duty of intermediary cannot be performed as effectively as possible. Sukuk issuing is one way that sharia banking might enhance financial sources. It is vital to take into account the advantages, possibilities, costs, and dangers when issuing sukuk in order to develop a suitable plan for funding increases. The following are contributing aspects to the advantages of issuing sukuk: a source of financing for business expansion; market analysis and sharia benchmarks; many contracts, coupons, and periods; and enhanced liquidity, efficiency, and profitability. Sub-factors for opportunity include: few issuers; high investor demand; robust regulatory backing; and a large investment base. Cost sub-factors include guarantee fees, emission charges, capital expenses, and loan costs. Sub-risk elements include interest rate risk, default risk, sharia compliance risk, and asset loss risk.

Common institutional ownership and the cost of debt in Taiwan

We examine the impact of common institutional ownership (CIO) of firms in the same industry on their cost of bank loans using data on Taiwan-listed firms from 1996 to 2021. The evidence shows that CIO is negatively related to loan spreads. When decomposing our sample according to a firm's life cycle and family ownership, the negative relation is significant only in the mature stage of a firm's life cycle and for family-owned firms. The subsample evidence suggests that CIO enhances effective monitoring to increase firm value, lowering loan spreads. We also find that the negative relation becomes statistically insignificant during the financial crisis period because that CIO tends to reduce investments in the same industry, thus weakening its effect during the global financial crisis.