Media, Reputational Risk, and Bank Loan Contracting

49 Pages Posted: 24 Sep 2021

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Stefano Manfredonia

Fordham University

Date Written: September 20, 2021

Abstract

This paper investigates how reputational risk arising from traditional and online media coverage of Corporate Social Irresponsibility (CSI) conducts affects the cost of borrowing. It reports that negative media attention has a significant and positive effect on bank loan costs. The result is robust to endogeneity concerns and alternative measures of key variables. It as well analyses other factors that can mitigate or amplify this effect. It reveals that the impact of negative media attention is more severe if the misconduct involves borrowers with high Corporate Social Responsibility (CSR) reputations. The findings also show that when prior lending relationships exist between the lead arranger and the borrower, the impact is smaller.

Keywords: bank sustainability performance, corporate social responsibility, negative media attention, business ethics

JEL Classification: G21, M14

Suggested Citation

Becchetti, Leonardo and Manfredonia, Stefano, Media, Reputational Risk, and Bank Loan Contracting (September 20, 2021). Available at SSRN: https://ssrn.com/abstract=3927156 or http://dx.doi.org/10.2139/ssrn.3927156

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Stefano Manfredonia (Contact Author)

Fordham University ( email )

113 West 60th Street
New York, NY 10023
United States

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