TY  - UNPD
A1  - Muermann, Alexander
A1  - Rauter, Thomas
T1  - Prestige and loan pricing
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 544
N2  - We find that prestigious companies pay lower spreads and upfront fees on their loans despite the fact that prestige does not predict default risk over the life of the loan. Using survey data on firm-level prestige, we show that a one standard deviation increase in prestige reduces loan spreads by 6.18% per year and upfront fees by 22.86%. We identify causal effects (i) using fraud by industry peers as an instrument for borrower prestige and (ii) exploiting a regression discontinuity around rank 100 of the prestige survey. Banks that lend to prestigious firms attract more business afterwards compared to otherwise similar institutions. Moreover, the effect of prestige on upfront fees is particularly strong for new bank relationships. Our findings suggest that prestigious firms receive cheaper funding because the associated lending relationship helps banks establish valuable credentials they use to compete for future borrowers.
T3  - CFS working paper series - 544 
KW  - Loan Pricing
KW  - Firm Prestige
KW  - Bank Incentives
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/41683
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-416830
UR  - http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2850570
N1  - First Version: October 19, 2015
This Version: January 28, 2016
IS  - January 28, 2016
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -