拉斯维加斯9888

Abstract：Using the Russell Index 1000 inclusion/exclusion as the discontinuity design setting, I find a causal effect of institutional ownership (IO) on bank loan pricing. Specifically, I find that an exogenous positive shock in institutional ownership appears to only affect the pricing term of bank loans but not the non-pricing terms. On average, a 35 % increase in IO will lead to a 29 bps lower loan spread which is about 1/5 of the average spread. However, the non-pricing terms such as collateral, maturity, and covenants do not change with the increase in IO. The reduction in loan spread is supported by the evidence that firms with high IO will have lower credit risk measured by expected default frequency using Merton model. Also, this effect is weaker for the family firms. Further investigation reveals that increase in liquidity and direct monitoring from institutional investors could be the channels through which institutional ownership affects bank loans pricing. Moreover, although the cost of bank loan is lower for firms with higher institutional ownership, these firms do not borrow more frequently than those with lower institutional ownership.