Relationship lending and firms' access to credit: evidence from the syndicated loan market
Date
2024
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Publisher
University of Delaware
Abstract
This study explores the dynamics of relationship lending in the context of syndicated loans and its implications for firms' access to credit. Chapter one distinguishes between borrower-lead lender (BL) relationships, characterized by direct interaction, and borrower-participant lender (BP) relationships, marked by indirect information acquisition. The analysis reveals that firms in BL relationships experience a significant increase in loan amounts and are more inclined to engage in the syndicated loan market following banks' initial syndications. In contrast, firms in BP relationships see an enhanced probability of obtaining credit but do not demonstrate a similar market focus. The research also sheds light on the evolving role of institutional lenders in the syndicated loan market. ☐ Chapter two explores the effects of the 2013 leveraged lending guidance on firms' access to leveraged financing, differentiating firms by their probability of default and the intensity of their bank relationships. The results support the "hold-up" theory, showing that firms with longer lending relationships face challenges in switching lenders and experience significant reductions in their chances of obtaining leveraged credit. The findings suggest that relationship lenders may use their informational advantage to extract monopoly rents, impacting firms' borrowing costs and access to credit.
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Keywords
Lending, Firms' access, Syndicated loan market, Borrower-lead lender relationships, Borrower-participant lender relationships