Quotation Mürmann, Alexander, Rauter, Thomas, Scheuch, Christoph. 2017. Fishing with Pearls: The Value of Lending Relationships with Prestigious Firms.


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Abstract

We provide novel evidence of banks establishing lending relationships with prestigious firms to signal their quality and attract future business. Using survey data on firm-level prestige, we show that lenders compete more intensely for prestigious borrowers and offer lower upfront fees to initiate lending relationships with prestigious firms. We also find that banks expand their lending after winning prestigious clients. Prestigious firms benefit from these relations as they face lower costs of borrowing even though prestige has no predictive power for credit risk. Our results are robust to matched sample analyses and a regression discontinuity design.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Fishing with Pearls: The Value of Lending Relationships with Prestigious Firms
Year 2017
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2703343

Associations

People
Mürmann, Alexander (Details)
Rauter, Thomas (Former researcher)
Scheuch, Christoph (Details)
Organization
Institute for Financial Research IN (Details)
Institute for Finance, Banking and Insurance IN (Details)
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