CEU Electronic Theses and Dissertations, 2025
| Author | Koos, Zsuzsa |
|---|---|
| Title | Loan Pricing and Risk Incentives in Private Credit |
| Summary | As a relatively new debt market, private credit has not been thoroughly studied. Due to its illiquid, opaque, and loosely governed nature, policymakers are emphasizing growing concerns about its trajectory. Few studies provide loan-level evidence comparing private credit and bank loan pricing, or examine whether fund compensation structures drive risk-taking. This thesis contributes to the emerging literature in two key ways: (1) by analyzing how private credit loan pricing differs from that of banks, and (2) by investigating whether incentive structures in Business Development Companies (BDCs) influence risk behavior. Using global loan-level data from LSEG Refinitiv (2014-2024), I conduct regression analyses and find that private credit loans carry, on average, spreads that are 170 basis points higher than comparable bank loans. Additionally, using 10-K filings from 25 BDCs (2018-2024), I estimate panel regressions to examine how performance-based fees and leverage interact to affect credit risk. I find that after controlling for both incentive fees and leverage, their interaction term is a strong predictor of greater total gains and losses, suggesting increased risk appetite under pressure to deliver returns. |
| Supervisor | Danis, András |
| Department | Undergraduate Studies BA |
| Full text | https://www.etd.ceu.edu/2025/koos_zsuzsa.pdf |
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