Borrower Technology Similarity and Bank Loan Contracting

87 Pages Posted: 22 Sep 2023 Last revised: 4 Feb 2025

See all articles by Mingze Gao

Mingze Gao

Macquarie University, Macquarie Business School

Yunying Huang

The University of Sydney

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Eliza Wu

The University of Sydney - Business School; Financial Research Network (FIRN)

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

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

Mingze Gao

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

HOME PAGE: http://mingze-gao.com

Yunying Huang

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Steven R. G. Ongena (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Eliza Wu

The University of Sydney - Business School ( email )

University of Sydney
Darlington
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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