Banking Relationships and Syndicated Loans during the 2008 Financial Crisis

The research shows that banking relationships are important to lending. However, few studies focus on the banking relationships in syndicated loans, although these loans have became a major source of financing. The last financial crisis clearly shows the impacts of credit rationing and tightening credit conditions, even in the syndicated loans market. We investigate whether banking relationships help firms to benefit from better terms for syndicated loans in a chaotic financial environment. Using a sample of syndicated loans arranged from 2003 to 2008 in North America and Europe, we find that firms with a previously developed relationship with a lead bank obtained a lower spread and a longer maturity during the financial crisis but did not benefit from larger loan facilities.