ECONOMIC EFFECTS OF THE CREDITORSʼ RIGHTS PROTECTION
Keywords:
creditors, protection of creditorsʼ rights, debtors, collateral, covenants, currency clause, credit insurance
Abstract
The readiness of creditors to satisfy the credit demand of the population and the economy under mutually acceptable conditions directly depends on the legal protection degree that creditors enjoy. In this paper, we deal with the protection of creditorsʼ rights and the instruments used for this purpose. The aim of this paper is to consider the economic effects that arise as a result of the application of instruments of the creditorsʼ rights protection, which affect both the financial position of creditors and debtors and the stability and efficiency of the financial and economic system as a whole. The research results show that the existence of an adequate level of protection of creditorsʼ rights has a strong positive impact on the size and activity of the credit market. On the other hand, the application of various instruments of the creditorsʼ rights protection can cause both positive and negative effects on the creditors position. Also, excessively high level of creditorsʼ protection can significantly worsen the position of debtors and, consequently, in the long run, the position of creditors themselves.
References
Adler, B. E., Kahan, M. (2013). The technology of creditor protection. University of Pennsylvania Law Review. 161 (7). 1773-1814.
Allen, L., Gottesman, A., Saunders, A., Tang, Y. (2012). The role of banks in dividend policy. Financial Management. 41 (3). 591-613.
Arping, S. (2014). Credit protection and lending relationships. Journal of Financial Stability. 10. 7-19.
Bebczuk, N. R. (2003). Asymmetric information in financial markets: introduction and applications. Cambridge, UK: Cambridge University Press.
Begović, B., Ilić, N. (2017). Poreklo zablude o svrsi valutne klauzule. Anali Pravnog fakulteta u Beogradu. 65 (2). 26-42.
Беговић, Б. (2016). Валутна клаузула: сврха, дилеме и могући исходи. Право и привреда. 54 (10-12). 24-53.
Beneish, M. D., Press, E. (1993). Costs of technical violation of accounting-based debt covenants. Accounting Review. 68. 233-257.
Benmelech, E., Bergman, N. K. (2009). Collateral pricing. Journal of financial Economics. 91 (3). 339-360.
Berger, A. N., Udell, G. F. (1990). Collateral, loan quality and bank risk. Journal of Monetary Economics. 25 (1). 21-42.
Bharath, S. T., Dahiya, S., Saunders, A., Srinivasan, A. (2011). Lending relationships and loan contract terms. The Review of Financial Studies. 24 (4). 1141-1203.
Bharath, S., Dahiya, S., Saunders, A., Srinivasan, A. (2007). So what do I get? The bank's view of lending relationships. Journal of Financial Economics. 85 (2). 368-419.
Binks, M. R., Ennew, C. T. (1996). Growing firms and the credit constraint. Small Business Economics. 8 (1). 17-25.
Brockman, P., Unlu, E. (2009). Dividend policy, creditor rights, and the agency costs of debt. Journal of Financial Economics. 92 (2). 276-299.
Cen, L., Dasgupta, S., Elkamhi, R., Pungaliya, R. S. (2016). Reputation and loan contract terms: The role of principal customers. Review of Finance. 20 (2). 501-533.
Chava, S., Livdan, D., Purnanandam, A. (2009). Do shareholder rights affect the cost of bank loans?. The Review of Financial Studies. 22 (8). 2973-3004.
Chava, S., Roberts, M. R. (2008). How does financing impact investment? The role of debt covenants. The Journal of Finance. 63 (5). 2085-2121.
Chen, Y. (2006). Collateral, loan guarantees, and the lenders’ incentives to resolve financial distress. The Quarterly Review of Economics and Finance. 46 (1). 1-15.
Christensen, H. B., Nikolaev, V. V. (2012). Capital versus performance covenants in debt contracts. Journal of Accounting Research. 50 (1). 75-116.
Clipici, E. V. (2013). Credit insurance during the financial crisis. SEA–Practical Application of Science. 1 (1). 38-45.
Coco, G. (2000). On the use of collateral. Journal of Economic Surveys. 14 (2). 191-214.
Coleman, A. D., Sharpe, I. G., Esho, N. (2002). Do bank characteristics influence loan contract terms? Australian Prudential Regulation AuthorityWorking Paper 2002-01.
Ćirović, M. (2007). Bankarstvo. Beograd: Naučno društvo Srbije.
DellʼAriccia, G., Friedman, E., Marquez, R. (1999). Adverse selection as a barrier to entry in the banking industry. The RAND Journal of Economics. 30 (3). 515-534.
Demerjian, P. R. (2017). Uncertainty and debt covenants. Review of Accounting Studies. 22 (3). 1156-1197.
Demerjian, P. R. (2007). Financial Ratios and Credit Risk: The Selection of Financial Ratio Covenants in Debt Contracts. AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper, https://ssrn.com/abstract=929907
Demiroglu, C., James, C. M. (2010). The information content of bank loan covenants. The Review of Financial Studies. 23 (10). 3700-3737.
Djankov, S., McLiesh, C., Shleifer, A. (2007). Private credit in 129 countries. Journal of financial Economics. 84 (2). 299-329.
Domazet, I., Vuković, V. (2015). Kreditno tržište Srbije: posustajanje ili kolaps. Poslovna ekonomija: časopis za poslovnu ekonomiju, preduzetništvo i finansije. 9 (1). 159-176.
Дудаш, А. И. (2016). Допуштеност једностраног повећања камате у уговорима о кредиту у праву Србије. Зборник радова Правног факултета у Новом Саду. 50 (2). 549–567.
Falato, A., Liang, N. (2016). Do creditor rights increase employment risk? Evidence from loan covenants. The Journal of Finance. 71 (6). 2545-2590.
Fan, H., Sundaresan, S. M. (2000). Debt valuation, renegotiation, and optimal dividend policy. The Review of Financial Studies. 13 (4). 1057-1099.
Galindo, A. J., Micco, A. (2007а). Creditor protection and credit response to shocks. The World Bank Economic Review. 21 (3). 413-438.
Galindo, A. J., Micco, A. (2007b). Bank Credit to small and medium Sized Enterprises: the role of creditor protection. https://ssrn.com/abstract=669583
Galindo, A. J. (2001). Creditor rights and the credit market: where do we stand? https://ssrn.com/abstract=1817246
Gorton, G., Ordonez, G. (2014). Collateral crises. American Economic Review. 104 (2). 343-378.
Graham, J. R., Li, S., Qiu, J. (2008). Corporate misreporting and bank loan contracting. Journal of Financial Economics. 89 (1). 44-61.
Harvey, C. R., Lins, K. V., Roper, A. H. (2004). The effect of capital structure when expected agency costs are extreme. Journal of Financial Economics. 74 (1). 3-30.
Heaton, J. B. (2002). Managerial optimism and corporate finance. Financial management. 31 (2). 33-45.
Хибер, Д., Живковић, М. (2015). Заштита корисника кредита од једностране измене висине уговорене камате. Зборник радова Правног факултета у Нишу. 54 (70). 573-586.
Homer, S., Sylla, R. E. (2005). A History of Interest Rates. Fourth edition. Hoboken, New Jersey: John Wiley & Sons, Inc.
Jimenez, G., Salas, V., Saurina, J. (2006). Determinants of collateral. Journal of financial economics. 81 (2). 255-281.
Jensen, G. R., Solberg, D. P., Zorn, T. S. (1992). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of Financial and Quantitative analysis. 27 (2). 247-263.
Jensen, Michael C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review. 76 (2). 323-329.
La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., Vishny, R. W. (1997). Legal determinants of external finance. The Journal Of Finance. 52 (3). 1131-1150.
Лазић, M. (2016). Заштита потрошача у кредитном односу. Зборник радова Правног факултета у Нишу. 55 (74). 53-70.
Лекпек, А. (2016). Ризични капитал и препреке за његово улагање. Економски погледи. 18 (4). 37-51.
Levine, C. B., Hughes, J. S. (2005). Management compensation and earnings-based covenants as signaling devices in credit markets. Journal of Corporate Finance. 11 (5). 832-850.
Lin, C., Ma, Y., Malatesta, P., Xuan, Y. (2011). Ownership structure and the cost of corporate borrowing. Journal of Financial Economics. 100 (1). 1-23.
Marković-Bajalović, D. (2020). Još jednom o kreditima indeksiranim u švajcarskim francima. Pravo i privreda. 58 (1). 64-113.
Murfin, J. (2012). The supply‐side determinants of loan contract strictness. The Journal of Finance. 67 (5). 1565-1601.
Nikolaev, V. V. (2010). Debt covenants and accounting conservatism. Journal of accounting research. 48 (1). 137-176.
Padilla, J., Requejo, A. (2000). The Cost and Benefits of the Strict Protection of Creditor Rights: Theory and Evidence. https://ssrn.com/abstract=1814659
Passalacqua, L. (2006). A pricing model for credit insurance. Giornale dell’Istituto Italiano degli Attuari. 69 (4). 87-123.
Pecchenino, R. A. (1988). The loan contract: mechanism of financial control. The Economic Journal. 98 (389). 126-137.
Petrović-Tomić, N. (2017). Ugovor o osiguranju sposobnosti vraćanja kredita. Anali Pravnog fakulteta u Beogradu. 65 (2). 91-112.
Попов, Ђ. (2012). Утицај валутне клаузуле и девизног курса на стање привреде Србије. Зборник радова Правног факултета у Новом Саду. 46 (3). 19-37.
Radović, M. (2021). Punovažnost valutne klauzule nakon stupanja na snagu Zakona o konverziji. Anali Pravnog fakulteta u Beogradu. 69 (1). 179-192.
Radović, V., Tesić, N. (2015). On creditor's supplemental rights. Anali Pravnog fakulteta u Beogradu. 63 (3). 141-169.
Rajan, R., Winton, A. (1995). Covenants and collateral as incentives to monitor. The Journal of Finance. 50 (4). 1113-1146.
Rampini, A. A., Viswanathan, S. (2013). Collateral and capital structure. Journal of Financial Economics. 109 (2). 466-492.
Roberts, M. R., Sufi, A. (2009). Control rights and capital structure: An empirical investigation. The Journal of Finance. 64 (4). 1657-1695.
Rose, P. S., Hudgins, S. C. (2005). Bankarski menadžment i finansijske usluge. Beograd: Data status.
Slawson, W. D. (1971). Standard form contracts and democratic control of lawmaking power. Harvard law review. 84 (3). 529-566.
Слијепчевић, Д. (2016). Примена валутне клаузуле и променљиве каматне стопе у уговору о кредиту. Привредни саветник. 16.
Soumaré, I. (2010). Credit insurance and investment: A contingent claims analysis approach. International Review of Financial Analysis. 19 (2). 98-107.
Stiglitz, J. E., Weiss, A. (1981). Credit rationing in markets with imperfect information. The American economic review. 71 (3). 393-410.
Strahan, P. E. (1999). Borrower risk and the price and nonprice terms of bank loans. FRB of New York Staff Report No. 90. https://ssrn.com/abstract=192769
Sweeney, A. P. (1994). Debt-covenant violations and managers' accounting responses. Journal of accounting and Economics. 17 (3). 281-308.
Šoškić, D. (2020). Valutna klauzula: ekonomsko-finansijske posledice. Revija Kopaoničke škole prirodnog prava. 2 (1). 69-81.
Qian, J., Strahan, P. E. (2007). How laws and institutions shape financial contracts: The case of bank loans. The Journal of Finance. 62 (6). 2803-2834.
Васиљевић, З. (2015). Права и обавезе из уговора о кредиту. Правни факултет Универзитета у Бањој Луци.
Whitehead, C. K. (2008). The evolution of debt: Covenants, the credit market, and corporate governance. Journal of Corporation Law. 34 (3). 641-677.
Закон о девизном пословању. Службени гласник РС. Бр. 62/2006, 31/2011, 119/2012, 139/2014 и 30/2018.
Allen, L., Gottesman, A., Saunders, A., Tang, Y. (2012). The role of banks in dividend policy. Financial Management. 41 (3). 591-613.
Arping, S. (2014). Credit protection and lending relationships. Journal of Financial Stability. 10. 7-19.
Bebczuk, N. R. (2003). Asymmetric information in financial markets: introduction and applications. Cambridge, UK: Cambridge University Press.
Begović, B., Ilić, N. (2017). Poreklo zablude o svrsi valutne klauzule. Anali Pravnog fakulteta u Beogradu. 65 (2). 26-42.
Беговић, Б. (2016). Валутна клаузула: сврха, дилеме и могући исходи. Право и привреда. 54 (10-12). 24-53.
Beneish, M. D., Press, E. (1993). Costs of technical violation of accounting-based debt covenants. Accounting Review. 68. 233-257.
Benmelech, E., Bergman, N. K. (2009). Collateral pricing. Journal of financial Economics. 91 (3). 339-360.
Berger, A. N., Udell, G. F. (1990). Collateral, loan quality and bank risk. Journal of Monetary Economics. 25 (1). 21-42.
Bharath, S. T., Dahiya, S., Saunders, A., Srinivasan, A. (2011). Lending relationships and loan contract terms. The Review of Financial Studies. 24 (4). 1141-1203.
Bharath, S., Dahiya, S., Saunders, A., Srinivasan, A. (2007). So what do I get? The bank's view of lending relationships. Journal of Financial Economics. 85 (2). 368-419.
Binks, M. R., Ennew, C. T. (1996). Growing firms and the credit constraint. Small Business Economics. 8 (1). 17-25.
Brockman, P., Unlu, E. (2009). Dividend policy, creditor rights, and the agency costs of debt. Journal of Financial Economics. 92 (2). 276-299.
Cen, L., Dasgupta, S., Elkamhi, R., Pungaliya, R. S. (2016). Reputation and loan contract terms: The role of principal customers. Review of Finance. 20 (2). 501-533.
Chava, S., Livdan, D., Purnanandam, A. (2009). Do shareholder rights affect the cost of bank loans?. The Review of Financial Studies. 22 (8). 2973-3004.
Chava, S., Roberts, M. R. (2008). How does financing impact investment? The role of debt covenants. The Journal of Finance. 63 (5). 2085-2121.
Chen, Y. (2006). Collateral, loan guarantees, and the lenders’ incentives to resolve financial distress. The Quarterly Review of Economics and Finance. 46 (1). 1-15.
Christensen, H. B., Nikolaev, V. V. (2012). Capital versus performance covenants in debt contracts. Journal of Accounting Research. 50 (1). 75-116.
Clipici, E. V. (2013). Credit insurance during the financial crisis. SEA–Practical Application of Science. 1 (1). 38-45.
Coco, G. (2000). On the use of collateral. Journal of Economic Surveys. 14 (2). 191-214.
Coleman, A. D., Sharpe, I. G., Esho, N. (2002). Do bank characteristics influence loan contract terms? Australian Prudential Regulation AuthorityWorking Paper 2002-01.
Ćirović, M. (2007). Bankarstvo. Beograd: Naučno društvo Srbije.
DellʼAriccia, G., Friedman, E., Marquez, R. (1999). Adverse selection as a barrier to entry in the banking industry. The RAND Journal of Economics. 30 (3). 515-534.
Demerjian, P. R. (2017). Uncertainty and debt covenants. Review of Accounting Studies. 22 (3). 1156-1197.
Demerjian, P. R. (2007). Financial Ratios and Credit Risk: The Selection of Financial Ratio Covenants in Debt Contracts. AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper, https://ssrn.com/abstract=929907
Demiroglu, C., James, C. M. (2010). The information content of bank loan covenants. The Review of Financial Studies. 23 (10). 3700-3737.
Djankov, S., McLiesh, C., Shleifer, A. (2007). Private credit in 129 countries. Journal of financial Economics. 84 (2). 299-329.
Domazet, I., Vuković, V. (2015). Kreditno tržište Srbije: posustajanje ili kolaps. Poslovna ekonomija: časopis za poslovnu ekonomiju, preduzetništvo i finansije. 9 (1). 159-176.
Дудаш, А. И. (2016). Допуштеност једностраног повећања камате у уговорима о кредиту у праву Србије. Зборник радова Правног факултета у Новом Саду. 50 (2). 549–567.
Falato, A., Liang, N. (2016). Do creditor rights increase employment risk? Evidence from loan covenants. The Journal of Finance. 71 (6). 2545-2590.
Fan, H., Sundaresan, S. M. (2000). Debt valuation, renegotiation, and optimal dividend policy. The Review of Financial Studies. 13 (4). 1057-1099.
Galindo, A. J., Micco, A. (2007а). Creditor protection and credit response to shocks. The World Bank Economic Review. 21 (3). 413-438.
Galindo, A. J., Micco, A. (2007b). Bank Credit to small and medium Sized Enterprises: the role of creditor protection. https://ssrn.com/abstract=669583
Galindo, A. J. (2001). Creditor rights and the credit market: where do we stand? https://ssrn.com/abstract=1817246
Gorton, G., Ordonez, G. (2014). Collateral crises. American Economic Review. 104 (2). 343-378.
Graham, J. R., Li, S., Qiu, J. (2008). Corporate misreporting and bank loan contracting. Journal of Financial Economics. 89 (1). 44-61.
Harvey, C. R., Lins, K. V., Roper, A. H. (2004). The effect of capital structure when expected agency costs are extreme. Journal of Financial Economics. 74 (1). 3-30.
Heaton, J. B. (2002). Managerial optimism and corporate finance. Financial management. 31 (2). 33-45.
Хибер, Д., Живковић, М. (2015). Заштита корисника кредита од једностране измене висине уговорене камате. Зборник радова Правног факултета у Нишу. 54 (70). 573-586.
Homer, S., Sylla, R. E. (2005). A History of Interest Rates. Fourth edition. Hoboken, New Jersey: John Wiley & Sons, Inc.
Jimenez, G., Salas, V., Saurina, J. (2006). Determinants of collateral. Journal of financial economics. 81 (2). 255-281.
Jensen, G. R., Solberg, D. P., Zorn, T. S. (1992). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of Financial and Quantitative analysis. 27 (2). 247-263.
Jensen, Michael C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review. 76 (2). 323-329.
La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., Vishny, R. W. (1997). Legal determinants of external finance. The Journal Of Finance. 52 (3). 1131-1150.
Лазић, M. (2016). Заштита потрошача у кредитном односу. Зборник радова Правног факултета у Нишу. 55 (74). 53-70.
Лекпек, А. (2016). Ризични капитал и препреке за његово улагање. Економски погледи. 18 (4). 37-51.
Levine, C. B., Hughes, J. S. (2005). Management compensation and earnings-based covenants as signaling devices in credit markets. Journal of Corporate Finance. 11 (5). 832-850.
Lin, C., Ma, Y., Malatesta, P., Xuan, Y. (2011). Ownership structure and the cost of corporate borrowing. Journal of Financial Economics. 100 (1). 1-23.
Marković-Bajalović, D. (2020). Još jednom o kreditima indeksiranim u švajcarskim francima. Pravo i privreda. 58 (1). 64-113.
Murfin, J. (2012). The supply‐side determinants of loan contract strictness. The Journal of Finance. 67 (5). 1565-1601.
Nikolaev, V. V. (2010). Debt covenants and accounting conservatism. Journal of accounting research. 48 (1). 137-176.
Padilla, J., Requejo, A. (2000). The Cost and Benefits of the Strict Protection of Creditor Rights: Theory and Evidence. https://ssrn.com/abstract=1814659
Passalacqua, L. (2006). A pricing model for credit insurance. Giornale dell’Istituto Italiano degli Attuari. 69 (4). 87-123.
Pecchenino, R. A. (1988). The loan contract: mechanism of financial control. The Economic Journal. 98 (389). 126-137.
Petrović-Tomić, N. (2017). Ugovor o osiguranju sposobnosti vraćanja kredita. Anali Pravnog fakulteta u Beogradu. 65 (2). 91-112.
Попов, Ђ. (2012). Утицај валутне клаузуле и девизног курса на стање привреде Србије. Зборник радова Правног факултета у Новом Саду. 46 (3). 19-37.
Radović, M. (2021). Punovažnost valutne klauzule nakon stupanja na snagu Zakona o konverziji. Anali Pravnog fakulteta u Beogradu. 69 (1). 179-192.
Radović, V., Tesić, N. (2015). On creditor's supplemental rights. Anali Pravnog fakulteta u Beogradu. 63 (3). 141-169.
Rajan, R., Winton, A. (1995). Covenants and collateral as incentives to monitor. The Journal of Finance. 50 (4). 1113-1146.
Rampini, A. A., Viswanathan, S. (2013). Collateral and capital structure. Journal of Financial Economics. 109 (2). 466-492.
Roberts, M. R., Sufi, A. (2009). Control rights and capital structure: An empirical investigation. The Journal of Finance. 64 (4). 1657-1695.
Rose, P. S., Hudgins, S. C. (2005). Bankarski menadžment i finansijske usluge. Beograd: Data status.
Slawson, W. D. (1971). Standard form contracts and democratic control of lawmaking power. Harvard law review. 84 (3). 529-566.
Слијепчевић, Д. (2016). Примена валутне клаузуле и променљиве каматне стопе у уговору о кредиту. Привредни саветник. 16.
Soumaré, I. (2010). Credit insurance and investment: A contingent claims analysis approach. International Review of Financial Analysis. 19 (2). 98-107.
Stiglitz, J. E., Weiss, A. (1981). Credit rationing in markets with imperfect information. The American economic review. 71 (3). 393-410.
Strahan, P. E. (1999). Borrower risk and the price and nonprice terms of bank loans. FRB of New York Staff Report No. 90. https://ssrn.com/abstract=192769
Sweeney, A. P. (1994). Debt-covenant violations and managers' accounting responses. Journal of accounting and Economics. 17 (3). 281-308.
Šoškić, D. (2020). Valutna klauzula: ekonomsko-finansijske posledice. Revija Kopaoničke škole prirodnog prava. 2 (1). 69-81.
Qian, J., Strahan, P. E. (2007). How laws and institutions shape financial contracts: The case of bank loans. The Journal of Finance. 62 (6). 2803-2834.
Васиљевић, З. (2015). Права и обавезе из уговора о кредиту. Правни факултет Универзитета у Бањој Луци.
Whitehead, C. K. (2008). The evolution of debt: Covenants, the credit market, and corporate governance. Journal of Corporation Law. 34 (3). 641-677.
Закон о девизном пословању. Службени гласник РС. Бр. 62/2006, 31/2011, 119/2012, 139/2014 и 30/2018.
Published
2021/10/28
Section
Review Paper