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Credit Conditions when Lenders are Commonly Owned

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Listed:
  • Colombo, Mattia
  • Grigolon, Laura
  • Tarantino, Emanuele

Abstract

We investigate how common ownership between lenders affects the terms of syndicated loans. We conjecture that common ownership between lenders mitigates information asymmetries on the quality of the borrower. We theoretically and empirically show that high common ownership decreases loan rates, lowers the share of the loan retained by the lead bank, and mitigates rationing at issuance. Further investigations support the hypothesis that common ownership is an information transmission device: it especially affects the terms of loans to new borrowers, and, as information flows from the lead bank to syndicate members, member-to-lead common ownership does not affect credit conditions.

Suggested Citation

  • Colombo, Mattia & Grigolon, Laura & Tarantino, Emanuele, 2022. "Credit Conditions when Lenders are Commonly Owned," CEPR Discussion Papers 17106, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17106
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    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

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