Learning Through Your Lenders: Common Lenders and Interfirm Information Transmission

This study investigates whether and how common lenders facilitate technological information transmission between borrowers. Using interfirm patent citations as a proxy for technological information transmission, we find that firm pairs with more common lenders exhibit a higher frequency of citing each other’s patents compared to those with fewer or no common lenders. Exploiting plausibly exogenous variations in common lenders, we conduct an instrumental variable analysis to further establish the causal effect of common lenders on borrowers’ cross-citations. Cross-sectional analyses show that the common lender effect is more pronounced for cross-technology subclass citations and external patents, among lenders’ large clients and less-experienced common lenders, and when the technological similarity between a citing firm-lender pair is higher. The effect is concentrated in high-tech specialist lenders, distant industry peers, firm pairs located in different states, and citing (cited) firms from more (less) competitive industries. Further analyses reveal that firms with more lender-based information generate more patents and exhibit greater innovation efficiency. Additionally, technology intermediary lenders are more likely to secure lead arranger positions in subsequent lending syndicates. This study provides the first large-scale empirical evidence on technological information diffusion between firms sharing the same lender, underscoring lenders' role as information intermediaries. Our findings contribute to the literature on financial intermediation and innovation, offering insights into the mechanisms through which lenders influence borrowers' technological progress.