Events

Prof. Kanyuan Huang
Assistant Professor of Accounting
Chinese University of Hong Kong (Shenzhen)

We provide evidence that banks use their branch networks to mitigate information frictions in syndicated lending. Using a novel dataset of correspondent branch locations extracted from loan agreements, we document that 83% of syndicated loans designate a branch outside the lead bank’s headquarters as the main point of contact. These branches are typically closer to the borrower and more experienced in the borrower’s industry. Loan spreads are negatively associated with borrower–branch proximity, with an economic magnitude twice as large as that associated with borrower–headquarter proximity. Consistent with distance impeding lenders’ post-violation decision-making, contracts tend to have fewer financial covenants and more collateral requirements when the correspondent branch is geographically distant from the borrower. Our findings suggest that banks actively leverage their branch networks to reduce monitoring frictions and tailor contract terms, highlighting the decentralized nature of oversight in the syndicated loan market.