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Forward Guidance and Corporate Lending

Delis, M. D. and Hong, S. and Paltalidis, N. and Philip, D. (2022) 'Forward Guidance and Corporate Lending.', Review of Finance, 26 (4). pp. 899-935.


We suggest that forward guidance, via publicly committing the central bank to future actions and creating associated expectations, fundamentally affects bank lending decisions independently of other forms of monetary policy. To test this hypothesis, we build a forward guidance measure based on the language used in the Federal Open Market Committee meetings and match this measure with syndicated loans. Our results show that expansionary forward guidance decreases corporate loan spreads and that this effect is stronger for well-capitalized banks lending to riskier firms. Forward guidance also affects nonprice lending terms, such as covenants, performance pricing provisions, and the loan syndicate structure. Additionally, banks tend to initiate new lending relationships with lower spreads after forward guidance issuance.

Item Type:Article
Full text:Publisher-imposed embargo until 22 September 2023.
(AM) Accepted Manuscript
File format - PDF
Publisher Web site:
Publisher statement:This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Finance following peer review. The version of record: Delis, M. D., Hong, S., Paltalidis, N. & Philip, D. (2022). Forward Guidance and Corporate Lending. Review of Finance 26(4): 899-935 is available online at:
Date accepted:01 September 2021
Date deposited:07 September 2021
Date of first online publication:22 September 2021
Date first made open access:22 September 2023

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