Friends with money

Joseph Engelberg, Pengjie Gao and Christopher A. Parsons

Journal of Financial Economics, 2012, vol. 103, issue 1, 169-188

Abstract: When banks and firms are connected through interpersonal linkages – such as their respective management having attended college or previously worked together – interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do not appear to reflect sweetheart deals. Subsequent firm performance, such as future credit ratings or stock returns, improves following a connected deal, suggesting that social networks lead to either better information flow or better monitoring.

Keywords: Asymmetric information; Bank lending; Cost of debt; Social connections; Lending outcomes (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (163)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X11001838
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:103:y:2012:i:1:p:169-188

DOI: 10.1016/j.jfineco.2011.08.003

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().