The Effects of Knowledge Complementarities on Participant Banks Choice Decisions

This paper focus on the mutual decision of lead arrangers and participant banks to cooperate in the syndicated loan market. The reputation building theory is a framework for determining the lead arranger’s partner choice by using the self-related factors and task-related factors on their collaboration. We find that there is a knowledge complementary effect among participant banks choices: The lead arrangers with lower reputation, e.g., inefficient operating and less market experiences, have higher incentive to choose well reputable partners. We show that reputation building is an important determinant of the choice of partners, whereas reputations for operating efficiency and industry expertise are important to the choice of particular bank