Friends with money |
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| Authors: | Joseph Engelberg Pengjie Gao Christopher A. Parsons |
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| Affiliation: | a Rady School of Management, University of California at San Diego, La Jolla, CA, USA
b Mendoza College of Business, University of Notre Dame, USA |
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| Abstract: | When banks and firms are connected through interpersonal linkages - such as their respective management having attended college or previously worked together - interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do not appear to reflect sweetheart deals. Subsequent firm performance, such as future credit ratings or stock returns, improves following a connected deal, suggesting that social networks lead to either better information flow or better monitoring. |
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| Keywords: | G21 G32 |
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