Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 913-935 |
| Number of pages | 23 |
| Journal | Journal of International Financial Markets, Institutions and Money |
| Volume | 22 |
| Issue number | 4 |
| Early online date | 9 May 2012 |
| DOIs | |
| Publication status | Published - Oct 2012 |
| Externally published | Yes |
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Asymmetric Information among Lending Syndicate Members and the Value of Repeat Lending. / Gadanecz, Blaise; Kara, Alper; Molyneux, Philip.
In: Journal of International Financial Markets, Institutions and Money, Vol. 22, No. 4, 10.2012, p. 913-935.Research output: Contribution to journal › Article
TY - JOUR
T1 - Asymmetric Information among Lending Syndicate Members and the Value of Repeat Lending
AU - Gadanecz, Blaise
AU - Kara, Alper
AU - Molyneux, Philip
PY - 2012/10
Y1 - 2012/10
N2 - We examine the effect of information asymmetries among syndicate members on loan prices. To this end we focus on the previous number of borrowing/lending relationships between individual borrowers and lenders and the duration of these interactions. Using this new, direct and explicit measure on a sample of 5867 syndicated loan transactions between 1993 and 2006, we find that when participant banks have information inferiority in the syndicate, they require higher loan spreads to compensate for this asymmetry. This is amplified when the borrowers are more opaque. We thus show how junior participant banks with repeat relationships with the same borrower graduate from uniformed to informed lenders (the spread goes down as asymmetry diminishes) and how they rely both on the arranger's reputation and their own repeat experience with the borrower.
AB - We examine the effect of information asymmetries among syndicate members on loan prices. To this end we focus on the previous number of borrowing/lending relationships between individual borrowers and lenders and the duration of these interactions. Using this new, direct and explicit measure on a sample of 5867 syndicated loan transactions between 1993 and 2006, we find that when participant banks have information inferiority in the syndicate, they require higher loan spreads to compensate for this asymmetry. This is amplified when the borrowers are more opaque. We thus show how junior participant banks with repeat relationships with the same borrower graduate from uniformed to informed lenders (the spread goes down as asymmetry diminishes) and how they rely both on the arranger's reputation and their own repeat experience with the borrower.
KW - Syndicated loans
KW - Repeat lending
KW - Asymmetric information among lenders
KW - Arranger reputation
KW - Opaque borrowers
UR - https://www.journals.elsevier.com/journal-of-international-financial-markets-institutions-and-money
U2 - 10.1016/j.intfin.2012.04.007
DO - 10.1016/j.intfin.2012.04.007
M3 - Article
VL - 22
SP - 913
EP - 935
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
SN - 1042-4431
IS - 4
ER -