Impact of ethical behavior on syndicated loan rates

Moshe Kim, Jordi Surroca, Josep A. Tribó

Research output: Contribution to journalArticlepeer-review


This paper shows that borrowers' ethical behavior leads lending banks to loosen financing conditions when setting loan rates. We advance the banking literature by stressing that the previous financing loosening is enhanced when there is similarity of lenders and borrowers along their ethical domain given that such similarity brings about familiarity and trust in non-opportunistic behavior between them, thereby contributing to lower information frictions. Unique data composed of 12,545 syndicated loan facilities from 19 countries for the period 2003-2007 indicate a 24.8% reduction in the mean spread associated with an increase of one standard deviation in the degree of borrowers' ethical behavior from its mean value. Such reduction is enhanced to 37.6% when lenders also behave in an ethical way. Results withstand a battery of robustness tests including the use of alternative databases that capture the effect of the 2008 financial crisis, financing alternatives such as equity financing as well as nonparametric estimations.

Original languageEnglish
Pages (from-to)122-144
Number of pages23
JournalJournal of Banking and Finance
Issue number1
StatePublished - Jan 2014

Bibliographical note

Funding Information:
The authors wish to thank Carlos Bendito, Senior Portfolio Manager of Energy & Climate, and Sustainable Investment Research International Company for their helpful comments and access to the Sustainalytics database. Thank also go to Andrés Almazan and Joan Santaló for very instructive comments as well as to participants at the Academy of Management Conference, 2009, the Strategic Management Conference, 2009, the 4th International Conference on Corporate Social Responsibility, Berlin 2010 and the Bank of Portugal for their helpful comments. Financial support from Comunidad de Madrid (Grant # 2008/00037/001 ), Ministerio de Economía y Competitividad (Grant # ECO2012-34734 ) and Ministerio de Ciencia y Tecnologia (Grant # SEJ2006-09401 , Grant # ECO2009-10796 and ECO2012-36559 ) is gratefully acknowledged. Kim would like to thank EIEF Rome for their generous hospitality where this paper was initiated. The usual disclaimers apply.


  • Banks
  • Business ethics
  • Cost of bank debt financing

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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