Redacted Disclosures and Bank Loan Contract Terms

ABSTRACT We investigate the impact of redacting disclosures on bank loan contracts. Our findings indicate that firms that redact information have loans with significantly higher spreads, shorter maturities, and more restrictive covenants and face a greater likelihood they will be required to post collateral compared to firms that do not redact. Additionally, we find the relationship between redactions and loan fees is significantly shaped by characteristics of both the borrowing firm and the lender. These results align with the notion that redaction heightens information asymmetry, particularly for lenders, underscoring the financial costs firms incur when protecting proprietary information.