Bank lending networks, experience, reputation, and borrowing costs

Christophe Godlewski, Bulat Sanditov and Thierry Burger-Helmchen
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Bulat Sanditov: University of Maastricht

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We investigate the network structure of syndicated lending markets and evaluate the impact of lenders’ network centrality, considered as measures of their experience and reputation, on borrowing costs. We show that the market for syndicated loans is a “small world” characterized by large local density and short social distances between lenders. Such a network structure allows for better information and resources flows between banks thus enhancing their social capital. We then show that lenders’ experience and reputation play a significant role in reducing loan spreads and thus increasing borrower’s wealth.

Keywords: Agency costs; bank syndicate; experience; loan syndication; reputation; small world; social network analysis. (search for similar items in EconPapers)
JEL-codes: G21 G24 L14 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-cta, nep-fmk, nep-net, nep-soc and nep-ure
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Working Paper: Bank lending networks, experience, reputation, and borrowing costs (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2010-07

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