Product market relationships and cost of bank loans : evidence from strategic alliances

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Title: Product market relationships and cost of bank loans : evidence from strategic alliances
ISBN: 978-952-462-663-7
Author: Fang, Yiwei ; Francis, Bill ; Hasan, Iftekhar ; Wang, Haizhi
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2011
Series number: 4/2011
Year of publication: 2011
Publication date: 1.2.2011
Published in: Published in Journal of Empirical Finance, Volume 19, Issue 5, December 2012: 653-674
DOI: 10.1016/j.jempfin.2012.06.002
Pages: 42 s.
Keywords: yritykset; strategiat; rahoitus; yhteistyö; luotot; kustannukset; pankkitoiminta; liittoumat
Abstract: This paper examines the effects of strategic alliances on non-financial firms bank loan financing. We construct several measures to capture firms alliance activities using the frequency of alliance activities, the prominence of the alliance partner and the relative networking position in the overall alliance network. We find that firms with active alliance involvement experience a lower cost of debt from banks. We also document that allying with a prestigious partner (ie S&P 500 firms) can provide an endorsement effect and benefit the borrowers by reducing the price of bank loans. Moreover, a borrowing firm positioned at the centre of an alliance network enjoys a lower cost of bank loans. Finally, we find that borrowing firms with alliance experience are less likely to use collateral and covenants in their loan contracts.
Rights: https://helda.helsinki.fi/bof/copyright


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