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Borrower Technology Similarity and Bank Loan Contracting

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Listed:
  • Gao, Mingze
  • Huang, Yunying
  • Ongena, Steven
  • Wu, Eliza

Abstract

Do banks accumulate knowledge about corporate technology, and does it matter for their lending? To answer this question, we combine corporate innovation with syndicated loan data. We find that loans to firms sharing similar technologies with banks’ prior borrowers obtain lower loan spreads. We can rule out product market competition, the value of their technology and ability to innovate, and/or numerous other firm characteristics as alternative explanations. By estimating a structural bank-borrower matching model and exploiting the consummation of bank mergers and acquisitions, we can show that shocks to banks’ technology knowledge causally affect loan spreads.

Suggested Citation

  • Gao, Mingze & Huang, Yunying & Ongena, Steven & Wu, Eliza, 2023. "Borrower Technology Similarity and Bank Loan Contracting," CEPR Discussion Papers 18624, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18624
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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