Borrower Technology Similarity and Bank Loan Contracting

Mingze Gao, Yunying Huang, Steven Ongena and Eliza Wu

No 18624, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

JEL-codes: G21 G32 O33 (search for similar items in EconPapers)
Date: 2023-11
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Working Paper: Borrower Technology Similarity and Bank Loan Contracting (2023)
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