How ancestral folklore about risk and failure helps explain the pricing of modern syndicated loans.
The paper links European syndicated loan contracts to measures of risk-related folklore in the cultural background of lead lenders. The central hypothesis is that cultural narratives may enter credit pricing as soft information, especially when stories emphasize failure after challenge or competition.
Loan spreads over floating-rate benchmarks, measured at the loan level and modeled with detailed loan, borrower, lender, regional, country, industry, and year controls.
Sample timing. Source: authors' descriptive figure from the project files.
The empirical design uses the cross-cultural folklore measures of Michalopoulos and Xue (2021), based on Berezkin's catalogue of oral traditions. A motif is a recurrent narrative element: a plot, character, symbolic image, or episode shared across traditions.
Oral traditions collected across cultural societies.
Recurring narrative elements become the unit of analysis.
Motifs related to challenge, competition, or risky action are identified.
Challenge motifs are classified as successful, unsuccessful, unclear, or not applicable.
Motif shares are aggregated at the folklore group level.
The lead bank's headquarters location is linked to the nearest folklore group.
The key explanatory variables are not country dummies in disguise. They vary at the folklore-group level, often below the country level, and distinguish the prevalence and outcome of challenge-related motifs.
Berezkin folklore groups represented in the European lending sample.
Challenge motifs decomposed by outcome type: successful, unsuccessful, unclear, and N/A. This is the paper's main visual bridge between folklore measurement and the empirical variables.
Lead-lender folklore with more challenge-related motifs is associated with higher loan spreads in richer specifications.
Failure in challenge narratives carries the pricing effect more clearly than the overall challenge measure.
Stories where risk-taking succeeds do not show the same spread-increasing effect.
One standard-deviation increase in relatively unsuccessful motifs corresponds to about 10.5% of the mean spread.
Binned relationship between loan spread and challenge-related folklore. Kept because it is directly aligned with the final paper's spread outcome.
Descriptive spread levels by lead-lender folklore group. This is supplementary context, not a substitute for the regression evidence.
The paper tests whether the folklore result survives richer cultural, geographic, and econometric controls. The aim is to separate the folklore channel from broader country culture and regional development differences.
Controls include Hofstede dimensions, religion, trust, and corruption measures. The main folklore variables remain economically meaningful.
The IV strategy uses neighboring folklore within a 225 km radius to capture cultural diffusion while limiting direct current-credit channels.
Additional fixed effects absorb time, industry, borrower-country, and lender-country variation across specifications.
Effects are stronger among stronger banks and stronger firms, consistent with folklore complementing, not replacing, hard information.
The article remains anchored by the journal DOI, while the embedded PDF gives visitors a low-friction way to inspect the argument, tables, and figures without leaving the companion site.
This page is a companion to the published article. Numerical claims are drawn from the paper and project figures; readers should cite the article for formal methods and results.
Article: Godlewski, C. and Weill, L. (2026). Tales that cost: Folklore and bank loan spreads. International Review of Financial Analysis, 111, 105100.
DOI: 10.1016/j.irfa.2026.105100