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Stress tests and loan pricing—Evidence from syndicated loans

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  • Lambertini, Luisa
  • Mukherjee, Abhik

Abstract

This paper estimates the impact of stress-testing on lending spreads. We use firm-level data on syndicated loans matched with bank holding company (BHC) data in our panel regressions. Using a difference-in-difference framework, we find: (1) BHCs that failed the stress tests increased their loan pricing; (2) Loan pricing is higher for all BHCs after the commencement of the stress tests. These findings suggest that stress-test failure leads to higher spreads in the syndicated loan market after the great financial crisis.

Suggested Citation

  • Lambertini, Luisa & Mukherjee, Abhik, 2022. "Stress tests and loan pricing—Evidence from syndicated loans," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003226
    DOI: 10.1016/j.frl.2021.102349
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    More about this item

    Keywords

    Bank stress tests; Loan price; Syndicated loans; SCAP; CCAR;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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