Lender-Borrower Stock Return Dependencies in Credit Networks: Evidence from Syndicated Loan Deals
We study the impact of credit networks on the interconnectedness between lenders' and borrowers' stock returns using syndicated loan data. We correct for biases from confounding factors and find significant stock return dependencies between small banks and large borrower firms with high default risk. Our analysis shows that portfolios of lender stocks, sorted based on signals from borrowers' retur