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DESCRIPTION:Bo Sun\n\nUniversity of Virginia\n\nPrepayment Option and Firm 
 Risk-taking\n\nDate: Friday\, May 2\, 2025\n	Time: 10:30-11:45 am\n	Location
 : Bronfman Bldg. (1001 Sherbrooke St. West)\, Room 245\n\nAll are cordiall
 y invited to attend.\n\nAbstract:\n\nThe prepayment option has been a perv
 asive feature of debt contacting\, even during periods of effectively zero
  interest rates when demand for interest-rate hedging was limited\, and ha
 s been linked to varying penalties depending on the type of debt. Why is p
 repayment widely used in debt contracts? Why is prepayment associated with
  differential penalties across types of debt? We explore these questions i
 n an agency theoretic framework of debt contracting. The option to prepay—
 representing opportunities to refinance at a favorable rate when informati
 on friction subsides over time—provides ex ante incentives for prudent ris
 k-taking\, thereby improving firm value. We rationalize prepayment penalty
  as a contracting device to deter inefficient prepayment. Leveraging the s
 upervisory Federal Reserve Y-14Q data on individual loan contracts\, we do
 cument data patterns on the take-up\, pricing\, and ex post performance of
  bank loans that are consistent with the incentivizing mechanism of prepay
 ment options.\n
DTSTART:20250502T143000Z
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LOCATION:Room 245\, Bronfman Building\, CA\, QC\, Montreal\, H3A 1G5\, 1001
  rue Sherbrooke Ouest
SUMMARY:Desmarais Global Finance Research Centre (DGFRC) Seminar: Bo Sun 
URL:/desautels/channels/event/desmarais-global-finance
 -research-centre-dgfrc-seminar-bo-sun-365130
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