Publication Type

Working Paper

Version

publishedVersion

Publication Date

11-2016

Abstract

This study examines how a firm’s business relationship with the U.S. government, in particular, sales to the government, impacts its loan contract terms and how the effect is different from that of major corporate customers. We find that firms with major government customers have a lower number of covenants and are less likely to have performance pricing provisions in their loan contracts than other firms, whereas major corporate customers do not have such impacts. We do not find evidence that major government customers affect the supplier firm’s loan spread, security, or maturity. We conjecture that lenders benefit from the strict monitoring activities of the government customer and reduce the use of covenants and performance pricing in loan contracts when the borrowing firm has a government customer.

Keywords

Government Customers, Loan Contract Terms

Discipline

Accounting

Research Areas

Corporate Reporting and Disclosure

First Page

1

Last Page

51

Identifier

10.2139/ssrn.2868761

Publisher

SSRN

Additional URL

https://doi.org/10.2139/ssrn.2868761

Included in

Accounting Commons

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