IDEAS home Printed from https://ideas.repec.org/p/bon/boncrc/crctr224_2021_279.html
   My bibliography  Save this paper

Credit Conditions When Lenders Are Commonly Owned

Author

Listed:
  • Mattia Colombo
  • Laura Grigolon
  • Emanuele Tarantino

Abstract

We investigate how common ownership between lenders affects the terms of syndicated loans. We provide a novel view on common ownership as a mechanism to mitigate the effects of information asymmetry on borrowers' quality. As the lead bank does not need to signal the quality of the borrower by means of dissipative signals, high common ownership should have a negative impact on loan rates, the share of the loan retained by the lead bank, and the dispersion in loan returns. We empirically verify all three predictions, leveraging on differences in the level of common ownership across lenders and facilities within a loan. Common ownership affects the terms of the loan more strongly in presence of opaque or new borrowers, when the lead arranger is more likely to hold an information advantage over the syndicate members. As information flows from the lead arranger to syndicate members, we show that member-to-lead and member-to-member common ownership does not affect the terms of syndicated loans.

Suggested Citation

  • Mattia Colombo & Laura Grigolon & Emanuele Tarantino, 2021. "Credit Conditions When Lenders Are Commonly Owned," CRC TR 224 Discussion Paper Series crctr224_2021_279, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_279
    as

    Download full text from publisher

    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp279
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    common ownership; ownership; control; syndicated loans; loans; banking;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bon:boncrc:crctr224_2021_279. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CRC Office (email available below). General contact details of provider: https://www.crctr224.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.