A Public Market Test of Private Credit Markets

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Allen Berger

Paper Title: A Public Market Test of Private Credit Markets: The “Bright Side” Versus the “Dark Side” of Relationship Lending
 
Speaker:  Allen Berger, Darla Moore School of Business, University of South Carolina
 
Time and Date: 12-1 pm, Wednesday 11th September 2024 (AEST)
 
Location: CB08.08.002, Level 8, Building 8, University of Technology Sydney, Australia (Map of campus)

Abstract: We address private market questions of bright- versus dark-side views of relationship lending in a dynamic setting using public market data for syndicated loans. We find bright-side empirical domination for past term loan relationships and dark-side prevalence for credit line-based relationships. We use bid-ask spreads on market prices of syndicated loans to indicate bright-side versus dark-side treatment. Narrower spreads from lead bank efforts may provide relationship borrowers bright-side credit availability, contract terms, and liquidity for their future loans, and vice versa for wider spreads. Our tests have high statistical power and employ strong fixed-effects identification, yielding research and policy implications.

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