The Journal of Finance

The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.

AFA members can log in to view full-text articles below.

View past issues


Search the Journal of Finance:






Search results: 4.

“Time for a Change”: Loan Conditions and Bank Behavior when Firms Switch Banks

Published: 09/21/2010   |   DOI: 10.1111/j.1540-6261.2010.01596.x

VASSO IOANNIDOU, STEVEN ONGENA

This paper studies loan conditions when firms switch banks. Recent theoretical work on bank–firm relationships motivates our matching models. The dynamic cycle of the loan rate that we uncover is as follows: a loan granted by a new (outside) bank carries a loan rate that is significantly lower than the rates on comparable new loans from the firm's current (inside) banks. The new bank initially decreases the loan rate further but eventually ratchets it up sharply. Other loan conditions follow a similar economically relevant pattern. This bank strategy is consistent with the existence of hold‐up costs in bank–firm relationships.


Distance, Lending Relationships, and Competition

Published: 07/20/2005   |   DOI: 10.1111/j.1540-6261.2005.00729.x

HANS DEGRYSE, STEVEN ONGENA

We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe.


Collateralization, Bank Loan Rates, and Monitoring

Published: 09/17/2014   |   DOI: 10.1111/jofi.12214

GERALDO CERQUEIRO, STEVEN ONGENA, KASPER ROSZBACH

We show that collateral plays an important role in the design of debt contracts, the provision of credit, and the incentives of lenders to monitor borrowers. Using a unique data set from a large bank containing timely assessments of collateral values, we find that the bank responded to a legal reform that exogenously reduced collateral values by increasing interest rates, tightening credit limits, and reducing the intensity of its monitoring of borrowers and collateral, spurring borrower delinquency on outstanding claims. We thus explain why banks are senior lenders and quantify the value of claimant priority.


The Impact of Bank Consolidation on Commercial Borrower Welfare

Published: 08/12/2005   |   DOI: 10.1111/j.1540-6261.2005.00787.x

JASON KARCESKI, STEVEN ONGENA, DAVID C. SMITH

We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger‐induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship.