Bank Lending Networks, Experience, Reputation, and Borrowing Costs
Christophe J. Godlewski
LaRGE Research Center (University of Strasbourg); EM Strasbourg Business School; FSESJ - Université de Haute Alsace
French National Center for Scientific Research (CNRS) - Bureau of Economic Theory and Application (BETA); EM Strasbourg Business School
November 16, 2010
We investigate the network structure of syndicated lending markets and evaluate the impact of lenders’ network centrality, considered as measures of their experience and reputation, on borrowing costs. We show that the market for syndicated loans is a “small world” characterized by large local density and short social distances between lenders. Such a network structure allows for better information and resources flows between banks thus enhancing their social capital. We then show that lenders’ experience and reputation play a significant role in reducing loan spreads and thus increasing borrower’s wealth.
Number of Pages in PDF File: 38
Keywords: Agency costs, bank syndicate, experience, loan syndication, reputation, small world, social network analysis
JEL Classification: G21, G24, L14working papers series
Date posted: March 19, 2011
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