This paper studies the effect of peer information banks collected from their previous lending to borrowers competitors on current loan pricing. I find that firms obtain lower loan rates when borrowing from banks that lent to close competitors recently. To establish a causal interpretation I utilize peer firms information-related class action lawsuit events and show that the benefit diminishes when the precision of peer information is reduced. Moreover the effect is more pronounced for firms with larger dispersion in analyst forecasts and higher uncertainty in hard information. Overall the findings suggest that banks learn from recent lending to peer firms and utilize peer information especially when information asymmetry is high.
G14 G21 G32
Peer information; Loan pricing; Bank lending; Information asymmetry