The PRI Academic Network is pleased to introduce the RI Quarterly, a new publication which aims to provide investment professionals and others the latest research on responsible investment. Each issue will focus on a number of academic papers around a theme selected by the PRI’s Academic Fellow, with this first edition examining research along the theme of ESG issues in bank loan pricing and decision making.
The following five papers have been reviewed in this RI Quarterly:
Do cultural differences matter?
A global research paper finds that banks are more likely to offer smaller loans at higher interest rates with more guarantees required, the more culturally distant the borrowing party is from the lending bank. The loan spread increases as the cultural distance increases, e.g. the spread between US-Canada is lower than between US-Japan, and it persists over time and with repeated transactions.
Friends with money
The authors find evidence that personal connections between the senior management of lending banks and the senior management of borrowing companies, such as management having studied or worked together, results in significantly lower interest rates being charged. In addition, subsequent to the loans being made the companies with personal connections to their lenders appear to outperform the companies with no personal connections.
We hope you find the RI Quarterly useful, and welcome any feedback you may have.