The Information Content from Lending Relationships Across the Supply Chain

Using unique administrative data on firm-to-firm payments and bank-to-firm lending, we investigate how lending to a firm is affected by same-bank lending to the firm’s customers and suppliers. We show that the supply of loans to a firm increases when the firm’s suppliers or customers have loans from the same bank. Additionally, we find that the revelation of negative information about a firm’s major customer causes an increase in the cost and a reduction in the duration of the loans provided to the firm. These results suggest that lending to firms connected through the supply chain conveys valuable information to banks