AFA Ph.D. Student Poster Session at the 2020 Annual Meeting(19)

This paper analyzes the effect of creditor rights and the conflict of interest between creditors on the design of corporate debt contracts. I study how bank-loan holders respond to improving control rights of securitization creditors following the enactment of the anti-recharacterization statute. I find that bank loans granted to firms using asset-backed securitization have higher interest rates after the legal change. Strengthening bargaining power of securitization lenders in bankruptcy would eliminate their incentives to maximize recoveries in chapter 11 and thus increase the risk of the other creditors such as bank-loan holders. Consistent with this intuition, I also find that loans to securitization users are charged with higher fees, have smaller size and include a greater number of covenants subsequently. I further show that the effect is more pronounced for smaller firms, firms with lower z-score and firms with higher ratio of receivables to assets. The results of my paper thus shows the unintended consequences arising from strengthening control rights of some corporate creditors.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFAPS2020&paper_id=204

Insurers' cash flows are largely independent of capital market conditions. Thus as the largest stakeholder in the corporate bond market, insurance firms may provide liquidity in stressful states, i.e.,"rainy days". We theoretically model and empirically support this distinct role played by insurers. Specifically, we show that insurer corporate bond purchases improve bond liquidity while their bond sales do not. Separating the sample into crisis and non-crisis periods, as well as bond groups based upon rating and liquidity, we find that liquidity provision by insurers is stronger under stressful conditions. Our empirical analyses reveal that cash flow position and investment horizons strongly influence insurers' purchase of low-rating bonds, and that insurers increased their purchase of low-rating bonds both during the financial crisis and after the adoption of the Dodd-Frank Act.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFAPS2020&paper_id=210