Does Firm Size Matter? When Determining Bank Term Loan Maturity

Abstract

Banks play extremely competitive role as a financial intermediate in all over the world because banks provide bundle of services to today?s business community by giving new bloods to smooth functioning of business activities. Among these services lending can be identify as a one of the major activity of a bank. In the process of analysis bank lending service, consideration on bank ordinary term loan is much more important. An ordinary term loan also known as business loan & it takes maturity to more than one year & it should be repay according to a specific time schedule like quarterly, semiannually or yearly. Under this researcher?s attempt was to identify the factors that banks consider when issue bank term loan as borrower size increases, negotiating power with the lender, information transparency increase and loan production cost and finally to find out the role plays by the firm size when determining maturity period of bank term loan. With a purpose of accomplishing above objective I examine the hypothesis that firm size affects the sensitivity of bank term loan maturity to its underlying determinants & data was collected via the questionnaire from twelve selected bank branches. Data were analyzed by using both descriptive statistics and inferential statistics. Results indicate that firm size not dependency in the determinants of bank term loan maturity and show that bank term loan maturity period is driven by the purpose of the borrower. Only "large" borrowers can manipulate bank loan contract terms so as to increase firm value.