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- Title
Does IRS Monitoring Matter for the Cost of Bank Loans?
- Authors
Bermpei, Theodora; Kalyvas, Antonios Nikolaos; Wolfe, Simon
- Abstract
We show that IRS monitoring exerts a significantly negative effect on the cost of syndicated loans. A one standard deviation increase in the probability of an IRS audit decreases loan spreads by around nine basis points. We also find that this effect is stronger for borrowers with better lending relationships and credible access to public markets. These results indicate that IRS monitoring could increase the bargaining power of borrowers and restrain banks from extracting informational rents from their lending relationships. Thus, they provide a novel insight into how IRS monitoring could lower the cost of financing from the banking system.
- Subjects
UNITED States. Internal Revenue Service; LOANS; BARGAINING power; STANDARD deviations; COST; BANK loans; SYNDICATED loans
- Publication
Journal of Financial Services Research, 2024, Vol 65, Issue 2/3, p153
- ISSN
0920-8550
- Publication type
Article
- DOI
10.1007/s10693-023-00403-9