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Tales that cost: Folklore and bank loan spreads

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  • Christophe Godlewski

    (EM Strasbourg - École de Management de Strasbourg = EM Strasbourg Business School - UNISTRA - Université de Strasbourg, LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

  • Laurent Weill

    (EM Strasbourg - École de Management de Strasbourg = EM Strasbourg Business School - UNISTRA - Université de Strasbourg, LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg, UK - Univerzita Karlova [Praha, Česká republika] = Charles University [Prague, Czech Republic] = Université Charles [Prague, Republique tchèque])

Abstract

This paper investigates whether cultural narratives embedded in folklore influence the pricing of syndicated loans. We combine loan-level data for European companies with the cross-cultural dataset of oral traditions compiled by Michalopoulos and Xue (2021) to examine whether stories about risk-taking shape loan spreads. We find that the presence of challenge-related motifs in a lender's cultural background is associated with higher spreads. More specifically, tales that portray unsuccessful outcomes lead to significantly higher loan spreads, while those depicting successful risk-taking have no discernible effect. A greater prevalence of failure over success in challenge-related folklore robustly predicts higher spreads across specifications. These findings suggest that cultural beliefs about risk—transmitted through folklore—affect how lenders perceive borrower uncertainty. By shaping the soft information environment in which credit decisions are made, ancestral narratives continue to influence the terms of modern financial contracts.

Suggested Citation

  • Christophe Godlewski & Laurent Weill, 2026. "Tales that cost: Folklore and bank loan spreads," Post-Print hal-05621409, HAL.
    • Handle: RePEc:hal:journl:hal-05621409
    DOI: 10.1016/j.irfa.2026.105100
    Note: View the original document on HAL open archive server: https://univoak.hal.science/hal-05621409v1
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