This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm's CEO. It also conducts empirical analyses to test the...

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm's CEO. It also conducts empirical analyses to test the...

This study investigates whether CEO perquisite of borrowing firms plays any significant role, both in terms of price and non-price settings, in financial contracts and reveals that lending banks demand significantly higher return (spread), more collateral, and stricter covenants from firms with...

Using a difference-in-differences approach, we show that relaxation of short-sale constraints helps to filter out low-quality borrowers from the bank loan market. Treated firms that can still borrow from banks enjoy a lower loan spread, compared with control firms without this sorting mechanism....