Abstract
This paper examines the effects of strategic alliances on non-financial firms’ bank loan financing. We construct several measures to capture firms’ alliance activities using the frequency of alliance activities, the prominence of the alliance partner and the relative networking position in the overall alliance network. We find that firms with active alliance involvement experience a lower cost of debt from banks. We also document that allying with a prestigious partner (ie S&P 500 firms) can provide an endorsement effect and benefit the borrowers by reducing the price of bank loans. Moreover, a borrowing firm positioned at the centre of an alliance network enjoys a lower cost of bank loans. Finally, we find that borrowing firms with alliance experience are less likely to use collateral and covenants in their loan contracts.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
