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- Title
Lending Relationships and the Pricing of Syndicated Loans.
- Authors
Zhang, Donghang; Zhang, Yafei; Zhao, Yijia
- Abstract
Using a dataset on syndicated loan primary market pricing adjustments, we examine whether relationship banks' information advantage facilitates price discovery in loan issuances. We find that the lead bank makes fewer adjustments to the initial pricing terms of a syndicated loan and shortens the syndication time when it has a stronger relationship with the borrower. A stronger relationship also reduces loan underpricing. A relationship lead bank relies less on information from syndicate members. Exogenous shocks to relationships caused by bank mergers and closures confirm our findings. We contribute to the literature by showing that relationship lending improves loan pricing efficiency. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4730.
- Subjects
LOANS; PRICES; SYNDICATED loans; TERM loans; MARKET prices; BANK mergers; MARKET pricing
- Publication
Management Science, 2024, Vol 70, Issue 2, p1113
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2023.4730