Loan Syndication Networks

Banks develop network connections through repeated co-syndication relationships with multiple lenders. We create measures of network centrality based on banks' historical co-syndication ties, and find that well-connected lenders are more likely to gain lead underwriter status and offer better loan terms. Our results are robust to variation in network connections generated by bank consolidations. Well-connected banks offer lower spreads to firms with higher levels of information asymmetry, underwrite loans faster, and retain a smaller fraction of the loan. The evidence is more consistent with recent theory suggesting networks mitigate information asymmetry in syndicates, rather than superior screening or monitoring.