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Bank Lending Networks, Experience, Reputation, and Borrowing Costs: Empirical Evidence from the French Syndicated Lending Market
Author(s) -
Godlewski Christophe J.,
Sanditov Bulat,
BurgerHelmchen Thierry
Publication year - 2012
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2011.02269.x
Subject(s) - reputation , business , loan , syndicated loan , centrality , empirical evidence , financial system , monetary economics , finance , economics , social science , philosophy , epistemology , sociology , mathematics , combinatorics
We investigate the network structure of bank lending markets and evaluate the impact of lenders' network centrality, considered a measure of their experience and reputation, on borrowing costs. We show that the French market for syndicated bank 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 captial. We then show that lenders' experience and reputation play a significant role in reducing loan spreads and thus increasing borrower's wealth.