Information Intermediaries: How Commercial Bankers Facilitate Strategic Alliances
60 Pages Posted: 22 Jun 2018 Last revised: 13 Mar 2019
Date Written: March 6, 2019
We investigate how bankers use private information to help borrowers combine resources in strategic alliances. Firms that have borrowed from the same banker or share an indirect connection through a network of bankers are significantly more likely to enter an alliance. Consistent with bankers overcoming informational frictions, their ability to facilitate alliances decreases with network distance, and is stronger for opaque borrowers. Alliances are associated with positive announcement returns and brokering banks are more likely to receive future underwriting mandates. We exploit quasi-exogenous variation in firms’ banker networks from interstate bank branching deregulation to show that this relationship is causal.
Keywords: Banking, Strategic Alliances, Information transmission
JEL Classification: G20, G21, G30
Suggested Citation: Suggested Citation