Financial institutions network and the certification value of bank loans
Résumé
Social networks play an important role in mitigating informational frictions related to financial intermediation, especially bank lending. We investigate the effect of the network of financial institutions on the certification value of bank loans using data on syndicated loans to European companies. We find that the presence of more central leaders in a syndicate substantially increases the stock market's reaction to loan announcements. This certification value is reinforced when informational frictions are more important but vanishes when there are severe disruptions in the functioning of financial markets, such as during the financial crisis of 2008.