How do banks finance R&D intensive firms? The role of patents in overcoming information asymmetry

Hoffmann Arvid, S. Kleimeier*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We examine how banks finance R&D intensive firms, focusing on the role of patents in overcoming information asymmetry in bank lending. Consistent with moral hazard in due diligence and monitoring, we find that lead arrangers retain a larger share of syndicated loans when lending to R&D intensive firms. Patents can partly overcome moral hazard problems, as banks retain a smaller share of R&D intensive firms’ loans if these firms have patents as a signal of the quality of their inventions. Our results are robust to alternative explanatory variable definitions and syndicate structure measures, different samples and subperiods, and difference-in-difference estimations.
Original languageEnglish
Article number101485
JournalFinance Research Letters
DOIs
Publication statusE-pub ahead of print - 31 Mar 2020

Keywords

  • syndicated loan
  • lead arranger
  • innovation
  • patent
  • information asymmetry
  • moral hazard

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