Lending when relationships are scarce: The role of information spread via bank networks
Alperovych, Yan Divakaruni, Anantha Manigart, Sophie
Alperovych, Yan
Divakaruni, Anantha
Manigart, Sophie
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2022
Journal
Journal of Corporate Finance
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Publication Volume
73
Publication Issue
April
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Abstract
We investigate how information flows within bank networks facilitate syndicate formation and lending in the leveraged buyout (LBO) market, where relationships between banks and borrowers are scarce and borrower opacity is high. Using novel measures that characterize a bank’s ability to source and disseminate information within its loan syndication network, we show that the extent of this capability influences which banks join the syndicate, the share the lead bank holds, and LBO borrowing terms. Banks’ ability to source and disseminate network-based information is particularly useful when ties to prospective borrowers are lacking, with the information flows extending beyond knowledge on PE firms and LBO targets.
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Keywords
Networks, Syndication, Lending, Information, Private Equity, Leveraged Buyouts