Relationship Lending in Syndicated Loans
Subtitle: a Participant’s Perspective
By: Xinlei Li
Publisher: [publisher not identified]
Published: 2017
Place of publication: [New York, N.Y.?]
Language: eng
Description: I explore the role of participants’ relationships with borrowers and lead arrangers in syndicated lending. I predict and find that these relationships mitigate the information asymmetry problems faced by participants with both borrowers and lead arrangers, and allow participants to take a larger share in the loan. In particular, participants with a borrower relationship take, on average, a 10% larger share of the loan, with the effect being more pronounced when the borrower is informationally opaque or less conservative in its accounting. Similarly, participants with a lead arranger relationship take, on average, a 9% larger share of the loan, with the effect being more pronounced: (i) when the borrower has engaged in accounting irregularities or covenant violations in the past, (ii) when the lead arranger is a repeat lender or a large lender, and (iii) when participants have limited information acquisition capacity. Furthermore, loans with a larger total share taken by participants with a borrower or lead arranger relationship are associated with a smaller lead arranger share, less concentrated loan syndicate structure, a lower loan spread, and a lower upfront fee, consistent with these relationships mitigating information asymmetry.

Overall, my study sheds light on how participant-level relationship lending shapes debt contracting.
Notes: Department: Business.

Thesis advisor: Fabrizio Ferri.

Thesis (Ph.D.)--Columbia University, 2017.