Lending when relationships are scarce: The role of information spread via bank networks

Yan Alperovych (), Anantha Divakaruni and Sophie Manigart
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Yan Alperovych: EM - EMLyon Business School
Anantha Divakaruni: UiB - University of Bergen
Sophie Manigart: UGENT - Universiteit Gent = Ghent University = Université de Gand

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Abstract: We investigate how information flows within bank networks facilitate syndicate formation and lending in the leveraged buyout (LBO) market, where relationships between banks and borrowers are scarce and borrower opacity is high. Using novel measures that characterize a bank's ability to source and disseminate information within its loan syndication network, we show that the extent of this capability influences which banks join the syndicate, the share the lead bank holds, and LBO borrowing terms. Banks' ability to source and disseminate network-based information is particularly useful when ties to prospective borrowers are lacking, with the information flows extending beyond knowledge on PE firms and LBO targets.

Keywords: networks; Syndication; Lending; information; Private equity; Leveraged buyouts (search for similar items in EconPapers)
Date: 2022-04-01
Note: View the original document on HAL open archive server: https://hal.science/hal-04325549v1
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Citations: View citations in EconPapers (1)

Published in Journal of Corporate Finance, 2022, 73, ⟨10.1016/j.jcorpfin.2022.102181⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04325549

DOI: 10.1016/j.jcorpfin.2022.102181

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