Do Corporate Loan Officers Impact Lending Decisions? Evidence from the Syndicated Loan Market

• In Event: Bank financial reporting and lending decisions

Abstract

This study examines and quantifies the importance of corporate loan officers in the syndicated lending market. We construct a comprehensive database containing identities of nearly 8,000 officers employed by major U.S. banks. We find that loan officers exert significant influence on loan contract terms and performance, suggesting that soft information is valuable and delegation is prevalent in this market. Our findings are robust to various tests addressing the matching between officers and banks, and between officers and borrowers. We observe greater officer effects for small borrowers and more delegation in large banks. Loan officers' impact does not diminish over time.

Authors

• Janet Gao, Indiana University

• Xiumin Martin, Washington University in St Louis

• Joseph Pacelli, Indiana University - Bloomington