What Drives Banks to Value Lending Relationships? The Role of the Chief Executive's Cultural Heritage

63 Pages Posted: 26 Mar 2021

See all articles by Christine Christofi-Hau

Christine Christofi-Hau

Southampton Business School; Imperial College Business School

Simon Wolfe

University of Southampton - Southampton Business School

Theodora Bermpei

University of Sussex - School of Business, Management and Economics

Antonios Nikolaos Kalyvas

Department of Banking and Finance, Southampton Business School, University of Southampton

Date Written: February 22, 2021

Abstract

We explore how bank CEOs' cultural heritage shapes the nexus between lending relationships and the cost of bank loans in the US syndicated loans market. We show that banks led by CEOs that trace their origin in more individualistic and masculine societies are less inclined to share with their borrowers the savings stemming from strong lending relationships. In contrast, banks led by CEOs that originate from societies where uncertainty avoidance and power distance are higher, exhibit a stronger propensity to reward their relationship borrowers with lower loan prices. These findings are consistent with the view that certain cultural attributes affect the degree to which relationships are valued in the societal and business contexts. Our study highlights the importance of considering lenders' culture when investigating the effects of lending relationships on the cost of bank loans.

Keywords: lending relationships, cost of bank loans, CEOs, cultural heritage

JEL Classification: G21, M14, Z10

Suggested Citation

Christofi-Hau, Christine and Wolfe, Simon and Bermpei, Theodora and Kalyvas, Antonios Nikolaos, What Drives Banks to Value Lending Relationships? The Role of the Chief Executive's Cultural Heritage (February 22, 2021). Available at SSRN: https://ssrn.com/abstract=3790748 or http://dx.doi.org/10.2139/ssrn.3790748

Christine Christofi-Hau

Southampton Business School ( email )

Highfield Campus
University Road
Southampton, SO17 1LP
United Kingdom

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London, SW7 2AZ
United Kingdom

Simon Wolfe

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

Theodora Bermpei

University of Sussex - School of Business, Management and Economics ( email )

Falmer, Brighton BN1 9SL
United Kingdom

Antonios Nikolaos Kalyvas (Contact Author)

Department of Banking and Finance, Southampton Business School, University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

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