ESG Performance of Firms and the Structure of Loan Syndicates: Moderating Role of Relationship

ABSTRACT This study examines the impact of firms' environmental, social and governance (ESG) performance on borrower–lender relationships within syndicated loans. Analyzing a global panel of contracts, we examine the impact of ESG scores on the number of lenders and the ownership of lead arrangers. Utilizing theories of information asymmetry, agency, relational lending, and resource dependence, our findings indicate that high ESG performance decreases lead bank retention, thus broadening syndicates and distributing risk. However, prior borrower–led relationships can reverse this effect, emphasizing that ESG and relational trust act as complementary governance channels, shaping modern global credit markets and capital allocation across sectors.