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Bank lending networks, experience, reputation, and borrowing costs

Author

Listed:
  • Christophe J. GODLEWSKI

    (LaRGE Research Center, Université de Strasbourg)

  • Bulat Sanditov

    (University of Maastricht)

  • Thierry Burger-Helmchen

    (BETA Research Center, 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.

Suggested Citation

  • Christophe J. GODLEWSKI & Bulat Sanditov & Thierry Burger-Helmchen, 2010. "Bank lending networks, experience, reputation, and borrowing costs," Working Papers of LaRGE Research Center 2010-07, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2010-07
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    Cited by:

    1. Jung Koo Kang & Christopher D. Williams & Regina Wittenberg-Moerman, 2021. "CDS trading and nonrelationship lending dynamics," Review of Accounting Studies, Springer, vol. 26(1), pages 258-292, March.
    2. Meixing Dai, 2012. "External Constraint and Financial Crises with Balance Sheet Effects," International Economic Journal, Taylor & Francis Journals, vol. 26(4), pages 567-585, March.

    More about this item

    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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