Lender Trust and Bank Loan Contracts

We examine the contractual implications of a lender’s trust for corporate loans. measure how trusting lender is using average attitude in chief executive officer’s ancestral country origin. find that banks with CEOs charge lower interest rates U.S. syndicated This effect identified within existing lender–borrower relationships and similar types Further analyses indicate reduces cost credit by boosting perceived credibility borrower information mitigating contracting problems. corroborate our findings conducting survey loan officers experience syndication. paper was accepted Gustavo Manso, finance. Supplemental Material: The internet appendix data are available at https://doi.org/10.1287/mnsc.2022.4371 .