N°26-18: Processing Public Information and Lender Composition in Syndicated Lending

How do reductions in the cost of processing public financial information affect syndicated lending? Using the SEC’s staggered introduction of eXtensible Business Reporting Language, we show that lower processing costs increase the value of public relative to private information, shifting comparative advantage toward lenders that rely more on public information. Nonbanks increase participation, especially when they lack industry expertise, and enter new borrower relationships, whereas banks do not respond. Nonbanks rely more on public financial information and less on lead arrangers’ relationship based inputs in participation decisions, while the lead arranger role remains unchanged. EDGAR download patterns support the processing-cost channel.