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Lead arranger reputation and the structure of loan syndicates

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  • Chaudhry, Sajid M.
  • Kleimeier, Stefanie

Abstract

This study explores the effects of information asymmetry and arranger reputations on syndicated loan structures. The moral hazard problem arising from information asymmetries between borrower and syndicate can be overcome only by the most reputable arrangers. Both moral hazard and adverse selection problems appear when arrangers have an information advantage over other syndicate participants. However, the adverse selection problem arises only when low-reputation arrangers lend to opaque borrowers.

Suggested Citation

  • Chaudhry, Sajid M. & Kleimeier, Stefanie, 2015. "Lead arranger reputation and the structure of loan syndicates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 116-126.
    • Handle: RePEc:eee:intfin:v:38:y:2015:i:c:p:116-126
    DOI: 10.1016/j.intfin.2015.05.021
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    Cited by:

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    2. Gregory J. Cohen & Jacob Dice & Melanie Friedrichs & Kamran Gupta & William Hayes & Isabel Kitschelt & Seung Jung Lee & W. Blake Marsh & Nathan Mislang & Maya Shaton & Martin Sicilian & Chris Webster, 2021. "The U.S. syndicated loan market: Matching data," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(4), pages 695-723, December.
    3. Kostas Pappas & Alice Liang Xu, 2023. "Do foreign lenders' national cultures affect loan pricing?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2006-2036, April.
    4. Christophe J. Godlewski & Bulat Sanditov, 2018. "Financial Institutions Network and the Certification Value of Bank Loans," Financial Management, Financial Management Association International, vol. 47(2), pages 253-283, June.
    5. Gabriel J. Power & Issouf Soumaré & Djerry C. Tandja M., 2022. "Certification by financial and legal advisors in private debt markets," The Financial Review, Eastern Finance Association, vol. 57(4), pages 893-923, November.
    6. Ratha, Dilip & De, Supriyo & Kurlat, Sergio, 2018. "Does governing law affect bond spreads?," Emerging Markets Review, Elsevier, vol. 36(C), pages 60-78.
    7. Burietz, Aurore & Picault, Matthieu, 2023. "To lend or not to lend? The ECB as the ‘intermediary of last resort’," Economic Modelling, Elsevier, vol. 122(C).
    8. Elnaz Bajoori & Shasi Nandeibam & Sajid Mukhtar Chaudhry, 2016. "Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence," Department of Economics Working Papers 57/17, University of Bath, Department of Economics.
    9. Drago, Danilo & Gallo, Raffaele, 2018. "Do multiple credit ratings affect syndicated loan spreads?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 1-16.
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    11. Chaudhry, Sajid M. & Bajoori, Elnaz & Nandeibam, Shasi, 2019. "Clustered pricing in the corporate loan market: Theory and empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 275-296.
    12. Gabriel J. Power & Djerry C. Mbianda Tandja, 2022. "Should lenders also advise? Evidence from project loans," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(4), pages 961-985, December.

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    More about this item

    Keywords

    Syndicated loans; Syndicate structure; Information asymmetry; Reputation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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