So what do I get? The bank's view of lending relationships

Sreedhar Bharath, Sandeep Dahiya, Anthony Saunders, Anand Srinivasan

Research output: Contribution to journalArticlepeer-review

200 Scopus citations

Abstract

While many empirical studies document borrower benefits of lending relationships, less is known about lender benefits. A relationship lender's informational advantage over a non-relationship lender may generate a higher probability of selling information-sensitive products to its borrowers. Our results show that the probability of a relationship lender providing a future loan is 42%, while for a non-relationship lender, this probability is 3%. Consistent with theory, we find that borrowers with greater information asymmetries are significantly likely to obtain future loans from their relationship lenders. Relationship lenders are likely to be chosen to provide debt/equity underwriting services, but this effect is economically small.

Original languageEnglish (US)
Pages (from-to)368-419
Number of pages52
JournalJournal of Financial Economics
Volume85
Issue number2
DOIs
StatePublished - Aug 2007
Externally publishedYes

Keywords

  • Bank loans
  • Debt/equity underwriting
  • Information asymmetry
  • Lending relationships

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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