The Network and Reputation of Financial Institutions and the Certification Value of Bank Loans

38 Pages Posted: 23 Apr 2014

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Bulat Sanditov

Maastricht University

Date Written: April 22, 2014

Abstract

Social networks and reputation play important roles in mitigating informational frictions related to financial intermediation, in particular bank lending. We investigate the effect of financial institutions’ network and reputation on the certification value of bank loans using data on syndicated loans to European companies. We find that the presence of more central and reputable leaders in the syndicate increases the stock market reaction to loan announcement. This certification value is reinforced when informational frictions are more important, but vanishes away in case of severe disruptions in the functioning of financial markets, such as during the financial crisis of 2008.

Keywords: bank loan, syndicated lending, reputation, social network analysis, betweenness centrality, event study, Europe.

JEL Classification: G21, G24, L14.

Suggested Citation

Godlewski, Christophe J. and Sanditov, Bulat, The Network and Reputation of Financial Institutions and the Certification Value of Bank Loans (April 22, 2014). Available at SSRN: https://ssrn.com/abstract=2427913 or http://dx.doi.org/10.2139/ssrn.2427913

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

Bulat Sanditov

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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