Supply Chain Relationships and Syndicate Loan Structure

54 Pages Posted: 8 Apr 2019 Last revised: 12 Aug 2019

See all articles by Ettore Croci

Ettore Croci

Catholic University of the Sacred Heart of Milan

Marta Degl'Innocenti

University of Southampton

Si Zhou

Shanghai University

Date Written: August 6, 2019

Abstract

Supply chain relationships provide a certification of the borrower’s quality in the credit market, but they expose lenders to additional risks. Consistent with the certification view, firms with supply chain links benefit from an easier access to loans. However, this effect is limited to loans in which the lead bank retains a high fraction, i.e. loans where the lender does not diversify. After showing that supply chain participation indeed increases the lead bank’s share, we document that supply chain relationships positively affect the cost of the loans indirectly through its effect on the loan structure. We do not find evidence of additional costs are associated with the supply chain per se. This evidence suggests that lead agents demand higher markups for their lack of diversification. Our results are robust after addressing endogeneity concerns, specific supplier-customer relationship characteristics, and relationship lending.

Keywords: Access to syndicated loans, Supply chain relationships, Loan syndication structure, Loan pricing

JEL Classification: G21, G30, L1

Suggested Citation

Croci, Ettore and Degl'Innocenti, Marta and Zhou, Si, Supply Chain Relationships and Syndicate Loan Structure (August 6, 2019). Available at SSRN: https://ssrn.com/abstract=3353214 or http://dx.doi.org/10.2139/ssrn.3353214

Ettore Croci

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Marta Degl'Innocenti

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Si Zhou (Contact Author)

Shanghai University ( email )

Room 522, Building 1,
Shanghai University,
Shanghai, Shanghai 20044
China

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