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Financial institution network and the certification value of bank loans

Listed author(s):
  • Christophe J. Godlewski

    (LARGE - Laboratoire de recherche en gestion et économie - Université de Strasbourg)

  • Bulat Sanditov

    (DEFIS - Droit, Economie, Finances et Sociologie - Télécom Ecole de Management - Institut Mines-Télécom)

Social networks and reputation are believed to play important roles in mitigating informational frictions related to financial intermediation, in particular bank lending. We investigate the effect of the network and reputation of financial institutions on the certification value of bank loans using data on syndicated loans to European companies. We find that the presence of more central and reputable leaders in a syndicate substantially increases the stock market's reaction to loan announcements. This certification value is reinforced when informational frictions are more important, but vanishes in case of severe disruptions in the functioning of financial markets, such as during the financial crisis of 2008.

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Paper provided by HAL in its series Post-Print with number hal-01273237.

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Date of creation: 08 Jun 2015
Publication status: Published in The 13th INFINITI Conference on International Finance, Jun 2015, Ljubljana Slovenia. 2015
Handle: RePEc:hal:journl:hal-01273237
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01273237
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