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The impact of financial crises on the syndicated loan spreads applied to public and private firms

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  • Drago, Danilo
  • Gallo, Raffaele

Abstract

We investigate the impact of financial crises on the syndicated loan spreads applied to public and private firms. We found evidence of a greater increase in loan spreads for European public firms than for private ones during the global financial crisis and the euro area sovereign debt crisis. This result is consistent with our hypothesis that public firms’ borrowing costs are more sensitive to financial market swings than those of private companies. Our results hold when we control for relationship banking effects, a different sample composition between crisis and non-crisis periods, estimating a propensity score matching, and adopting a sample of syndicated loans to US public firms.

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  • Drago, Danilo & Gallo, Raffaele, 2020. "The impact of financial crises on the syndicated loan spreads applied to public and private firms," Journal of Financial Stability, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:finsta:v:46:y:2020:i:c:s1572308919306692
    DOI: 10.1016/j.jfs.2019.100718
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    3. De Novellis, G. & Musile Tanzi, P. & Ranalli, M.G. & Stanghellini, E., 2024. "Leveraged finance exposure in the banking system: Systemic risk and interconnectedness," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 90(C).
    4. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Fu, Mengchuan, 2021. "The going-public decision and firm risk," Journal of Financial Stability, Elsevier, vol. 54(C).
    5. Chen, Hsuan-Chi & Chou, Robin K. & Lin, Chih-Yung & Lu, Chien-Lin, 2022. "Bank loans during the 2008 quantitative easing," Journal of Financial Stability, Elsevier, vol. 59(C).
    6. Danilo Drago & Concetta Carnevale, 2020. "Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market," Sustainability, MDPI, vol. 12(18), pages 1-30, September.
    7. Dridi, Ichrak & Boughrara, Adel, 2021. "On the effect of full-fledged IT adoption on stock returns and their conditional volatility: Evidence from propensity score matching," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 179-194.

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    More about this item

    Keywords

    Financial crisis; Syndicated loan; Public firm; Loan spread; Market sensitivity;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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