Borrower Technology Similarity and Bank Loan Contracting
87 Pages Posted: 22 Sep 2023 Last revised: 4 Feb 2025
Date Written: September 22, 2023
Abstract
Do banks accumulate knowledge about corporate technology, and does it matter for their lending? To answer this question, we combine corporate innovation with syndicated loan data. We find that loans to firms sharing similar technologies with banks’ prior borrowers obtain lower loan spreads. We can rule out product market competition, the value of their technology and ability to innovate, and/or numerous other firm characteristics as alternative explanations. By estimating a structural bank-borrower matching model and exploiting the consummation of bank mergers and acquisitions, we can show that shocks to banks’ technology knowledge causally affect loan spreads.
Keywords: Technology similarity, Loan contracting, Matching model, Relationship lending
JEL Classification: G21, G32, O33
Suggested Citation: Suggested Citation
Gao, Mingze and Huang, Yunying and Ongena, Steven R. G. and Wu, Eliza, Borrower Technology Similarity and Bank Loan Contracting (September 22, 2023). Swiss Finance Institute Research Paper No. 23-84, Available at SSRN: https://ssrn.com/abstract=4579677 or http://dx.doi.org/10.2139/ssrn.4579677
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