@article{f6d84d11dad64b4eb0afb5a0cc72cb10,
title = "Lender Trust and Bank Loan Contracts",
abstract = "We examine the contractual implications of a lender{\textquoteright}s trust for corporate loans. We measure how trusting a lender is using the average trust attitude in the chief executive officer{\textquoteright}s ancestral country of origin. We find that banks with trusting CEOs charge lower interest rates in U.S. syndicated loans. This effect is identified within existing lender–borrower relationships and similar types of loans. Further analyses indicate that trust reduces the cost of credit by boosting the perceived credibility of borrower information and by mitigating contracting problems. We corroborate our findings by conducting a survey of loan officers with experience in loan syndication.",
author = "Jens Hagendorff and Sonya Lim and Nguyen, {Duc Duy}",
note = "Funding Information: The authors are grateful to Gustavo Manso (the editor), an anonymous associate editor, and two anonymous referees for many helpful comments and suggestions. The authors thank Ben Sila for the many helpful conversations and Tobias Berg, Cl{\'a}udia Cust{\'o}dio, David Dixon, Tarik Driouchi, Paul Guest, Felix Irresberger, Dirk Jenter, Jonathan Karpoff, Kevin Keasey, Kai Li, Ivan Lim, Gerald Lobo, Bill Megginson, Nikos Paltalidis, Dennis Philip, Raghu Rau, Abhishek Srivastav, Rebecca Str{\"a}tling, Francesco Vallascas, Patrick Verwijmeren, Dmitri Vinogradov, and Nick Wilson as well as seminar participants at Durham University; King{\textquoteright}s College London; Roma Tre University; Queen{\textquoteright}s University Belfast; and the Universities of Glasgow, Leeds, and Nottingham for helpful comments. The usual disclaimer applies. Publisher Copyright: {\textcopyright} 2023 Authors. All rights reserved.",
year = "2023",
month = mar,
doi = "10.1287/mnsc.2022.4371",
language = "English",
volume = "69",
pages = "1758--1779",
journal = "MANAGEMENT SCIENCE",
issn = "0025-1909",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "3",
}