Link About It: Information Asymmetry, Knowledge Pooling and Syndication in Project Finance Lending

In a collaborative setting, banks have an additional way to deal with asymmetric information between themselves and their borrowers: by pooling information. We explore the extent to which lead arrangers in the project finance syndicated lending market strategically choose their new partners in order to pool information, thereby lowering the overall degree of asymmetric information between themselves and their borrowers. We find that information pooling explains with whom banks collaborate, why they reach further into their network to find new partners and why they go outside their existing network if the need to pool information is high enough.