Law firm expertise in the private debt market
研究发现，当牵头银行聘请顶级律师事务所时，贷款利率会提高13.6个基点，但若借款人也使用顶级律所，这一溢价消失；顶级律所对贷款定价和条款的影响在借款人议价能力弱时更强。
• Loan interest rates increase by 13.6 basis points when lenders engage a top-tier law firm • The effect of top-tier law firms is stronger when borrowers have weak bargaining power • The effect of top-tier law firms decreases when there are more lead banks in the syndicate • Lenders engaging top-tier law firms charge higher fees and require stricter loan terms We document that top-tier law firms have a material impact on the pricing and structure of syndicated loan contracts. When lead banks engage a top-tier law firm, loan interest rates increase by 13.6 basis points, but this spread premium disappears if the borrower also uses a top-tier law firm. Our results are robust to alternative proxies for top-tier law firms and endogeneity treatment. Top-tier law firms’ ability to increase loan spreads to benefit lenders is more pronounced when borrowers have relatively weak bargaining power, and when the syndicate involves fewer lead banks. We observe that loans with top-tier law firms tend to have shorter deal completion times. In addition, lenders who engage top-tier law firms often charge higher fees and are more likely to require collateral and stricter covenants in their loan contracts. Overall, our evidence suggests top-tier law firms act in the best interest of lender clients, enabling them to negotiate more favorable pricing and terms in private debt agreements.