Information frictions inside a bank: Evidence from borrower switching between branches

Bank branches hold locally acquired "soft" information about borrowers, raising the question of whether such information can be transmitted effectively across units. Using the universe of corporate loans issued by a major commercial bank in a decade, we find that when firms switch branches within the same bank, their new loans carry significantly lower spreads. Yet these benefits fade: within a year, loan spreads revert to market levels and eventually exceed them, revealing a clear pattern of intra-bank hold-up. These findings demonstrate that organizational frictions within banks materially distort lending outcomes, linking relationship lending to broader theories of delegation, coordination, and imperfect information transmission inside firms.