Lender Certification Premiums

33 Pages Posted: 27 May 2003

See all articles by Douglas O. Cook

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration

Carolin D. Schellhorn

Saint Joseph's University - Department of Finance

Lewis J. Spellman

University of Texas at Austin - Department of Finance

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Abstract

The announcement of a bank loan by a borrowing firm has been shown to have a positive effect on the market value of the borrower's claims. This is consistent with a lender's implied endorsement of the borrower - an endorsement that has value to the borrower. In this paper, we investigate whether the lender is able to extract a premium loan rate or certification premium in return. We find empirical evidence that in the absence of collateral reputable lenders are able to exact a certification premium.

Keywords: Bank Lending, Certification, Loan Pricing

JEL Classification: G21

Suggested Citation

Cook, Douglas O. and Schellhorn, Carolin D. and Spellman, Lewis J., Lender Certification Premiums. Available at SSRN: https://ssrn.com/abstract=367380 or http://dx.doi.org/10.2139/ssrn.367380

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8971 (Phone)
205-348-0590 (Fax)

Carolin D. Schellhorn

Saint Joseph's University - Department of Finance ( email )

Philadelphia, PA 19131
United States
610-660-1657 (Phone)
610-660-1986 (Fax)

Lewis J. Spellman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5875 (Phone)
512-327-8701 (Fax)

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