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Prior Lending Relationships and the Effectiveness of Commitments in Sustainability-Linked Loans

Author

Listed:
  • Gamze Ozturk Danisman

    (Istanbul Bilgi University)

  • Jaideep Oberoi

    (SOAS - School of Oriental and African Studies - University of London [London])

  • Victor Henry Osei

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

Using a global sample of sustainability-linked loans, we examine how prior relationships between borrowers and lead arranging banks-acting as sustainability agents-influence the structure of key performance indicators (KPIs) of these loans. We find that existing relationships are associated with fewer yet broader KPIs spanning multiple ESG dimensions.Moreover, when such relationships are present, greater KPI intensity leads to improved postissuance ESG performance, particularly in the environmental domain. Our results are robust to a variety of checks, including instrumental variable and propensity score matching techniques, highlighting the significance of relationship lending in shaping effective sustainability incentives.

Suggested Citation

  • Gamze Ozturk Danisman & Jaideep Oberoi & Victor Henry Osei & Amine Tarazi, 2025. "Prior Lending Relationships and the Effectiveness of Commitments in Sustainability-Linked Loans," Working Papers hal-05081778, HAL.
    • Handle: RePEc:hal:wpaper:hal-05081778
    Note: View the original document on HAL open archive server: https://hal.science/hal-05081778v1
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    More about this item

    Keywords

    JEL classification: G20; G21; Q56 Bank lending Sustainability-linked loan ESG score Performance-based lending Relationship lending JEL classification: G20; Q56 Bank lending Sustainability-linked loan ESG score Performance-based lending Relationship lending; Q56 Bank lending; Sustainability-linked loan; ESG score; Performance-based lending; Relationship lending JEL classification: G20; Relationship lending;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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