Incorporating ‘Mortgage-Loan’ Contracts into an Agricultural Supply Chain Model under Stochastic Output

This paper constructs an internal financing model in which the purchaser acts as the core leading enterprise to provide loans when the farmer has fixed assets as collateral. Numerical results show that the existence of fixed assets will increase the expected profit of the farmer, redistributing the risk and profit between the purchaser and the farmer. At the same time, the purchaser and the government are encouraged to provide more funds to the farmer with low value of its fixed assets, which will aid the overall return of the supply chain and the development of supply chain finance. In addition, under the framework of this model, the increase of agricultural production is beneficial to the farmer, not the purchaser. In the case of the same output level, we can alleviate this problem by selecting high-end agricultural products with high price elasticity of demand and high choking price so as to improve the profits of both purchaser and farmer.

Recourse as Shadow Equity: Evidence from Commercial Real Estate Loans

We study the role that recourse plays in the commercial real estate loan contracts of the largest U.S. banks. We find that recourse is valued by lenders and is treated as a substitute for conventional equity. At origination, recourse loans have rate spreads that are at least 20 basis points lower and loan-to-value ratios that are around 3 percentage points higher than non-recourse loans. Dynamically, recourse affects loan modification negotiations by providing additional bargaining power to the lender. Recourse loans were half as likely to receive accommodation during the COVID-19 pandemic, and the modifications that did occur entailed a relatively smaller reduction in payments.

Why Does Microfinance Target Women? Empirical Evidence from Nigeria

Over the last three decades, microfinance has featured in the Global South development policies as a potential contributor to inclusive financial services, poverty reduction and women empowerment. However, why women are the primary customers of microfinance banks and institutions remains an ongoing research subject. This article presents a study of women in Rivers State, Nigeria, using qualitative research approach. It was found that microfinance financial inclusion objectives in Nigeria are targeted at the active poor—those who own small business and rely on group lending methodology and collateral substitutes to minimize lending risks. Of the active poor, microfinance prioritizes women because of gender stereotypes that women have more “integrity,” show more commitment to loan contracts and are more susceptible to social pressure and sanctions. Targeting women is, therefore, a deliberate and strategic policy to advance the interest of microfinance backers. Therefore, this author contends that microfinance is not a scheme that provides whole-scale financial inclusion and poverty reduction. Instead, it seeks to leverage income-generating activities of the active poor to extract profits. Consequently, the article contributes towards illuminating the role of gender and local context in microfinance practices.

A felhalmozott nyugdíjjárulékok előtörlesztési célú felhasználásának modellezése lakáscélú hitelek esetén = Modelling the use of accumulated pension contributions for repayment of housing loans

A befizetett nyugdíjjárulékok a járulékfizetők szempontjából részben megtakarításként értelmezhetők. Mivel lakáshitel felvételekor a járulékfizető hitelfelvevők nem férnek hozzá ezekhez a megtakarításokhoz, magasabb hitelösszeget kell felvenniük, ami után jellemzően magasabb kamatot kell fizetniük, mint amennyi a nem hozzáférhető megtakarításaik hozama. Ha az egyén szerződhetne az állammal arra, hogy a nyugdíjjárulékai egy részét előtörlesztésként felhasználhassa, és az államnál így keletkező hiányt kamatostul visszafizeti, akkor a hitelfelvevő életpályajövedelme növekedne, mivel a lakáshitelek kamata magasabb az államkötvények kamatánál. Ha az így keletkezett jövedelmet az egyén a nyugdíjkasszába fizeti, akkor hosszútávon a többletet fel lehet osztani az állam és az egyén későbbi nyugdíjkifizetése között. Bizonyos esetekben a hitelszerződés lejáratakor az egyén felhalmozott nyugdíjjárulékai akár 25-30 százalékkal is magasabbak lehetnek. A 2017-ben fennálló lakáscélú hitelek állománya esetében az alkalmazott módszer 20 éves időtávon reálértéken kb. 500 Mrd forinttal magasabb felhalmozott járulékfizetést eredményezhet. Ha 2018-tól kezdve minden újonnan megkötött lakáscélú hitel esetében biztosítjuk a szóban forgó lehetőséget, és ezért később magasabb nyugdíjakat is kapnak a programban részt vevők, az növelné az államadósságot, az elérhető nyugdíjtöbblet azonban nagyobb az állam által viselt terheknél. = Pension contributions may partly be considered as savings from the contributors’ perspective. Since borrowers cannot access this kind of savings when taking a mortgage loan, they need to borrow a higher loan amount, the interest of which is usually higher than the implied return on pension contributions. If contributors could contract the state to use their contributions for early repayment and pay the increased deficit of the state with interest, the life cycle income of the contributor could increase since the interest rate of mortgage loans is higher than government bond yields. If the difference is transferred to the state pension fund, in the long run it could be shared between the state and the contributor. In this way in some cases the accumulated pension contributions may be 25 to 30 percent higher at the expiration of the original loan contract. Considering the prevailing housing loans in 2017 in Hungary, the applied method could increase pension contributions by around 500 billion HUF at constant prices in twenty years. If from 2018 on, contributors could use their public pension savings regarding all new housing loan contracts, this would increase government debt, but the higher pensions in the future would be greater than the additional burden of the government.

Confidentiality in loan credit agreements

PurposeThis study has two primary objectives. First, it analyzes the information content of confidentiality strictness in corporate loan credit agreements. Second, it examines how confidentiality strictness impacts covenant design, lending syndicate structure and loan pricing.Design/methodology/approachUsing a sample of 6,327 loan credit agreements originated by US public firms in the period of 1996–2017, this study measures the confidentiality strictness in loan contracts using textual analyses that capture the appearance of confidentiality-related words and the length of confidentiality provision. All regressions include relevant loan characteristics, firm-specific accounting variables, industry and year fixed effects. To address the endogeneity concern, the paper uses borrowing firms' rival cash holdings and R&D expenditures to instrument for confidentiality strictness in two-staged least square regressions.FindingsBorrowers which have higher R&D and operate in more competitive product markets have tighter confidentiality policies. Furthermore, this study reveals that confidentiality strictness is negatively associated with the imposition of financial covenants, especially performance covenants. Loan contracts for borrowers with stricter confidentiality on average have more relaxed covenant intensity, measured by the number of covenants. The study also shows that stricter confidentiality attracts finance companies, which have strong expertise in product markets of their parent firms, into the lending syndicate. However, confidentiality-conscious borrowers with higher degree of information asymmetry are subject to higher loan spreads.Originality/valueThis study provides the first examination of confidentiality policies in loan contracts and supports the idea that loan provisions are not simply made of “boilerplate” language. The results suggest that, for confidentiality-sensitive borrowers, the greater exposure to product market competition helps control managerial slack and substitute monitoring from financial markets.

Does corporate political party ideology matter? Evidence from bank loan contracts

Purpose This paper aims to examine how a firm’s political party orientation (Republican or Democratic), which is measured as the composite index based on the political party leanings of top managers, affects bank loan contracts. This study also investigates how the political culture of local states has a significant impact on loan contracts. Design/methodology/approach This research uses various databases including the Loan Pricing Corporation’s DealScan database, financial covenant violation indicators based on the Securities and Exchange Commission (SEC) filings, firm bankruptcy filings and political culture index data to examine the impact of political orientation on the cost of debt. This paper also includes the state level of gun ownership and bachelor’s degrees to investigate how local political culture affects the loan contract. To control endogenous concerns, this paper uses an instrumental variable analysis. Findings Firms that have Republican-oriented political identities pay lower yield spreads for the main costs of debt including all-in-spread-drawn and all-in-spread-undrawn. This pattern is consistent with other fees of bank loans. This paper finds that an increase in conservative political policies toward Republican orientations is negatively associated with the cost of debt. The main findings also show that the political culture in the state where the headquarters of the borrowing firm are located plays an important role in bank loan contracts. Originality/value The findings in this paper provide evidence that a firm’s political party orientation significantly affects the loan contract terms in both pricing and non-pricing terms. To the best of the author’s knowledge, this is the first study that shows the importance of political party identification on loan contracts by separating the sample into Republican, neutral and Democratic.

TỶ LỆ LÃI SUẤT TRONG HỢP ĐỒNG VAY TIỀN THEO QUY ĐỊNH CỦA PHÁP LUẬT DÂN SỰ VIỆT NAM QUA CÁC THỜI KỲ TRONG MỐI LIÊN HỆ VỚI PHÁP LUẬT TÍN DỤNG

Interest rates are a financial tool to ensure the rights of lenders in loan contracts. Accordingly, the borrower is obliged to pay interest if so agreed or provided by law. Through the amendments of the Civil Code, interest rates are an item that has had many changes compared to other provisions in loan agreements. However, the interest rates prescribed in the current Civil Code still cause different interpretations, especially in relation to credit laws. This leads to inconsistent application of the law, especially when dealing with credit contract disputes. Therefore, based on the study of interest rate regulations on loan contracts under the laws of Vietnam over time, we analyze some problems about interest rates and credit law under the current Civil Code and make some specific recommendations to solve the problems.

Some Aspects of Implementation of the Principle of Integrity in Consumer Lending: in Search for the Balance of Interests

Threats to consumer and social security in the conditions of imbalance of interests of parties under consumer loan contracts result in the necessity to adjust the current legislation. The significant increase in litigation between borrowers and lenders confirms the need to find new approaches to the regulation of the area in question. The aim of the research is to analyze the most common forms of unfair behavior of credit and microfinance organizations in the light of the implementation of fundamental principles of civil law. The main attention is paid to the determination of essential criteria of the principle of integrity. The paper provides for the comparison between different approaches to understanding its content in fundamental jurisprudence, the possibility of their implementation in law enforcement.The paper uses methods of legal model analysis, formal-legal and system-structural methods. Comparative analysis of the norms of current Russian and foreign legislation, as well as the method of law enforcement monitoring. It allows us to offer tools to restore the balance between the interests in execution of consumer loan contracts.According to the results of the study, the author compiles a list of characteristics of the principle of integrity with due regard to such factors as lack of information about a difficult financial situation of the borrower or other circumstances preventing the conclusion of a contract, the prohibition of the inclusion of asymmetric and arbitrary terms of the contract, mandatory consideration of public interest, etc. The listed elements of the criteria will contribute to the balance of interests of the parties in the antinomy of the principles of integrity and freedom of contract. The author makes the conclusion that it is expedient to include algorithms of implementation of fundamental principles of regulation in special laws, which will contribute to harmonization of interests of participants of civil legal relations in the field of consumer lending.

Effects of the Menu of Loan Contracts on Borrower Behavior

We study how the menu of contracts presented to a decision maker—including contracts she may be precluded from choosing—affects her choice of remunerative but risky actions relative to lower paying, less risky alternatives. We do this through a series of laboratory experiments modeled after the loan repayment options offered to U.S. student borrowers, analyzing borrowers’ task (career) choices in settings that vary the menu of available and unavailable loan repayment plans and knowledge of unavailable options. In these experiments, we observe behavior that is inconsistent with predictions from standard economic models in which agents can easily make complex decisions and each alternative in a choice set is evaluated independently of other potential options. Instead, we provide evidence that expanding the menu of choices or making an agent aware of choices that she has been denied can affect how a contract is valued. Our empirical findings are most consistent with behavioral models that allow for anticipated regret over a choice that turns out to be suboptimal ex post or preferences for simplicity and gratitude for being unburdened from having to make a choice. This paper was accepted by Yan Chen, decision analysis.