The Role of Bankers in the U.S. Syndicated Loan Market

Abstract

I construct a novel dataset of individual bankers in the U.S. syndicated loan market to analyze the impact of bankers for the largest, most transparent borrowers. I exploit within-firm variation in personal relationship strength from banker turnover and find that stronger relationships lead to significantly lower interest rates. Relationship loans are associated with fewer bankruptcies and fewer favorable modifications in renegotiations. Lower rates therefore derive from increased lending efficiency, rather than nepotism. While personal relationships generally increase credit availability, during the financial crisis these relationships locked in borrowers with affected banks. Bankers also exhibit time-invariant preferences for specific loan characteristics.