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oai:recercat.cat:10230/485502025-12-20T16:47:44Zcom_2072_6col_2072_452952
RECERCAT author Botsch, Matthew author Vanasco, Victoria 2021-10-01T06:40:35Z2021-10-01T06:40:35Z2019 Includes supplementary materials for the online appendixThis paper studies bank learning through repeated interactions with borrowers from a new perspective. To understand learning by lending, we adapt a methodology from labor economics to analyze how loan contract terms evolve as banks acquire new information about borrowers. We construct “proxy” variables for this information using data from borrowers’ out-of-sample, future credit performance. Due to the timing of their construction, banks could not have used these variables directly to price loans. We nonetheless find that these proxies increasingly predict loan prices as relationships progress, even after controlling for possible omitted variable bias. Our methodology provides strong evidence that: (a) bank learning affects loan prices, and (b) relationship benefits are heterogeneous. In particular, higher quality borrowers face differentially lower spreads as their relationship with lenders develop – and banks learn about their quality – while lower quality borrowers see loan prices increase and their loan amounts fall. We further find suggestive evidence that banks incorporate CEO-specific information into loan prices. © Elsevier http://dx.doi.org/10.1016/j.jfi.2018.03.002 info:eu-repo/semantics/openAccess Learning Banks Information acquisition Relationship lending Syndicated loans Learning by lending info:eu-repo/semantics/article info:eu-repo/semantics/acceptedVersion