The effect of abnormal institutional attention on bank loans

•We examine whether abnormal institutional attention (AIA) influences bank loans.•AIA is positively related to borrowers’ CARs around loan announcements.•Banks charge a significantly lower loan spread for borrowers with higher AIA.•This effect becomes stronger when borrowers have high information asymmetry.•This effect becomes stronger when borrowers have weak market competition. We investigate whether abnormal institutional attention (AIA, measured following Ben-Rephael, Da, and Israelsen, 2017) influences bank loans. First, we find that AIA is positively related to borrowers’ cumulative abnormal returns around loan announcements. Second, banks charge a significantly lower loan spread, require less collateral, and approve larger loans for borrowers with higher AIA. Third, the effect of AIA becomes stronger when borrowers have high information asymmetry and weak market competition. Overall, our findings support the idea that banks consider AIA information when making lending decisions.