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Lending Relationships and the Pricing of Syndicated Loans

Author

Listed:
  • Donghang Zhang

    (Moore School of Business, University of South Carolina, Columbia, South Carolina 29208)

  • Yafei Zhang

    (Alliance Manchester Business School, University of Manchester, Manchester M15 6PB, United Kingdom)

  • Yijia (Eddie) Zhao

    (College of Management, University of Massachusetts Boston, Boston, Massachusetts 02125)

Abstract

Using a dataset on syndicated loan primary market pricing adjustments, we examine whether relationship banks’ information advantage facilitates price discovery in loan issuances. We find that the lead bank makes fewer adjustments to the initial pricing terms of a syndicated loan and shortens the syndication time when it has a stronger relationship with the borrower. A stronger relationship also reduces loan underpricing. A relationship lead bank relies less on information from syndicate members. Exogenous shocks to relationships caused by bank mergers and closures confirm our findings. We contribute to the literature by showing that relationship lending improves loan pricing efficiency.

Suggested Citation

  • Donghang Zhang & Yafei Zhang & Yijia (Eddie) Zhao, 2024. "Lending Relationships and the Pricing of Syndicated Loans," Management Science, INFORMS, vol. 70(2), pages 1113-1136, February.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:2:p:1113-1136
    DOI: 10.1287/mnsc.2023.4730
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    References listed on IDEAS

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    Cited by:

    1. Yao Lu, 2025. "The Spillover Effect of Liquidity Transparency on Liquidity Holdings," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 63(4), pages 1583-1627, September.
    2. Matthew A. Phillips, 2025. "Syndicated Lending Relationships, Information Asymmetry, and Market Making in the Secondary Loan Market," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 63(5), pages 1761-1807, December.
    3. Edith Hotchkiss & Hurong Sun & Liying Wang & Yijia (Eddie) Zhao, 2026. "Firms’ Response to Credit Supply: Evidence from Upsized Corporate Bond Offerings," Management Science, INFORMS, vol. 72(7), pages 5780-5805, July.

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