Lender Certification Premiums

Topics:
Investment and Capital Markets
Tags:
Borrower,
McCombs School Of Business
Source:
McCombs School Of Business

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Overview: This literature implies the borrower receives value from the loan because the loan announcement has a positive influence on the market value of the borrower's claims. The implicit reason for the borrower deriving value from the loan, beyond the funding, is that the lender creates the presumption that the borrower has the capacity to honor the loan. Interested parties assume that the lender screens the borrower's private information prior to making the loan. Hence, the process of certifying a borrower by issuing a loan is akin to a credit enhancement or a credit rating.

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Format: PDF | Size: 127KB | Date: Jun 2001 | Pages: 33

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