“Strategic Alliances and Lending Relationships” – by Dr. Derrald Stice
Accounting & Law Seminar
Dr. Derrald Stice
Assistant Professor of Accounting
Hong Kong University of Science & Technology
This study provides evidence that strategic alliances help firms to build up new bank relationships. We find that firms newly entering a strategic alliance are more likely to obtain debt financing from banks that have previously lent to their partners. We also find that these relationship banks provide lower interest spreads on these loans than the borrower’s other banks. We provide evidence that firms with a good information environment and less financial constraint are more likely to start relationships with the banks of their strategic alliance partners. However, we find that for the firms that do obtain a loan, those with bad information environments and more financial constraints benefit the most in lending costs. In addition to the pricing benefits we document, we also provide evidence that strategic alliances lead to non-price loan term benefits. Our results are robust to a variety of different specifications. Overall, our paper provides new insights on the value of strategic alliances for debt contracting.