Bank Learning

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.advisor Puttonen, Vesa Poikela, Henna 2017-02-14T07:50:05Z 2017-02-14T07:50:05Z 2016
dc.description.abstract In this thesis I examine bank learning in the context of lending to large publicly listed firms. I hy-pothesize that banks learn valuable private information about their borrowers over the course of lending relationships, and that banks use this proprietary information to set subsequent loan terms. Additionally, I hypothesize that the opportunity for bank learning increases with the inten-sity of the bank-borrower relationship. Following a new empirical methodology recently intro-duced to finance, I construct a proxy for unobservable latent firm quality. By interacting this proxy with relationship time, I am able to examine how private bank learning impacts loan terms (inter-est rates and loan amount) over time. A significant relationship between the learning term and loan terms demonstrates that banks acquire proprietary information over the course of a bank-borrower relationship, which is then used to set subsequent loan terms. Examining a sample of 489 syndicated loans to 40 UK-based publicly listed companies made be-tween 1988-2004, I find evidence of bank learning and the incorporation of this learned infor-mation into subsequent loan prices. I find that loan interest rate spread is decreasing 0.15 basis points per loan interaction as a result of learning. Additionally, I find that the impact of learning on loan interest rate is more than three times greater in higher intensity relationships, as proxied by the presence of information-intensive acquisition advisory service interactions between the bank and borrower. I do not find loan amount to be adjusted as a result of bank learning, suggest-ing that the borrower rather than the bank determines loan size. en
dc.format.extent 59
dc.language.iso en en
dc.title Bank Learning en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.subject.keyword bank learning en
dc.subject.keyword relationship banking en
dc.subject.keyword relationship intensity en
dc.subject.keyword syndicated loans en
dc.identifier.urn URN:NBN:fi:aalto-201702142271
dc.type.ontasot Master's thesis en
dc.type.ontasot Maisterin opinnäyte fi
dc.programme Finance en
dc.subject.helecon rahoitus fi
dc.subject.helecon pankit fi
dc.subject.helecon oppiminen fi
dc.subject.helecon tieto fi
dc.subject.helecon yritykset fi
dc.ethesisid 14903 fi
dc.location P1 I fi

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