Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103909
Authors: 
Adam, Tim R.
Burg, Valentin
Scheinert, Tobias
Streitz, Daniel
Year of Publication: 
2014
Series/Report no.: 
SFB/TR 15 Discussion Paper 475
Abstract: 
We examine the impact of managerial optimism on the inclusion of performance-pricing provisions in syndicated loan contracts (PSD). Optimistic managers may view PSD as a relatively cheap form of financing given their upwardly biased expectations about the firm's future cash flow. Indeed, we find that optimistic managers are more likely to issue PSD, and choose contracts with greater performance-pricing sensitivity than rational managers. Consistent with their biased expectations, firms with optimistic managers perform worse than firms with rational managers after issuing PSD. Our results indicate that behavioral aspects can affect contract design in the market for syndicated loans.
Subjects: 
Optimism Bias
Performance-Sensitive Debt
Debt Contracting
Syndicated Loans
JEL: 
G02
G30
G31
G32
Document Type: 
Working Paper

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