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Management earnings forecasts (MEFs) may reduce information risk by corroborating the inferences that lenders draw from their private communication with borrowers. Consistent with this idea, we find that among firms with a general policy of issuing MEFs, those providing MEFs in the 6 months before loan origination with a forecast horizon beyond the origination date enjoy lower loan spreads. The frequency and precision of MEFs are also negatively associated with loan spreads. The associations are stronger when lenders' need for corroboration of their private information is expected to be greater. The associations are not driven by a firm's general information environment, signaling of managerial ability, opportunistic disclosure, or competition between public and private debt markets. Moreover, the issuance, frequency, and precision of MEFs are associated with loan amounts more spread out among participating lenders, suggesting that MEFs also reduce information asymmetry within a loan syndicate. Our study provides insight into the corroboration role of publicly disseminated MEFs in private loan markets. [ABSTRACT FROM AUTHOR]

Do banks price the risk of stranded fossil fuel reserves? To address this question, we hand collect global data on corporate fossil fuel reserves from 2002 to 2016, match it with syndicated loans, and subsequently compare the loan rate charged to fossil fuel firms — along their climate policy exposure — to other firms. We find that banks price climate policy exposure, especially after 2015. We also uncover that our main effect further increases for loans with longer maturity, that loan size to fossil fuel firms increases, and that ‛Green' banks also charge higher loan rates to fossil fuel firms. [ABSTRACT FROM AUTHOR]

We investigate how bankers use information from lending relationships to help borrowers find partners for strategic alliances. Firms that have borrowed from the same banker or share an indirect connection through a network of bankers are significantly more likely to enter an alliance. Consistent with bankers overcoming informational frictions, their ability to facilitate alliances decreases with banker-network distance, and is stronger for opaque borrowers. Firms connected to more potential partners via banker networks enter more alliances. These alliances are associated with positive announcement returns, and brokering banks are more likely to receive future underwriting mandates. [ABSTRACT FROM AUTHOR]

We show that IRS monitoring exerts a significantly negative effect on the cost of syndicated loans. A one standard deviation increase in the probability of an IRS audit decreases loan spreads by around nine basis points. We also find that this effect is stronger for borrowers with better lending relationships and credible access to public markets. These results indicate that IRS monitoring could increase the bargaining power of borrowers and restrain banks from extracting informational rents from their lending relationships. Thus, they provide a novel insight into how IRS monitoring could lower the cost of financing from the banking system. [ABSTRACT FROM AUTHOR]

This article expands the investigation of systematic investing to broadly syndicated, leveraged loans. The results reveal that systematic exposures to (short-term) value, momentum, illiquidity, quality, low risk, carry, and a combination thereof are well rewarded. Monthly rebalanced long-only factor portfolios exhibit impressive Sharpe and information ratios, as well as economically and statistically significant alphas. While the performance of factor portfolios declines over longer investment horizons, it remains significant. A key implication of this research is that active credit managers employing factor-neutral loan trading strategies are potentially overlooking a viable source of incremental returns. Thus, the authors propose factor construction/screening approaches that are easy to use and implement from a practical perspective. [ABSTRACT FROM AUTHOR]

We exploit the quasi-random assignment of federal bank examiners to syndicated loans to study the effect of supervision on corporate lending. Following supervisory rating downgrades, banks decrease credit commitments and downgrade internal risk assessments. Borrowers face larger commitment reductions whenever banks have low ex ante screening and monitoring incentives or whenever examiners' assessments contain more information than banks' assessments, suggesting that examinations complement bank monitoring. Although public firms can offset the loss of bank credit by tapping external capital markets, smaller and more opaque private firms draw on internal cash balances instead and reduce investment and sales growth. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.4854. [ABSTRACT FROM AUTHOR]

Despite its large and increasing size in the United States and Europe, the private debt (PD) market, compared to the bank and syndicated loan markets, has been researched little. In this paper, we survey U.S. and European investors with private debt assets under management (AuM) of over $390 billion. These investors are primarily direct lending funds. We ask the general partners (GPs) how they source, select, and evaluate deals; how they think of private debt relative to bank and syndicated loan financing; how they monitor their investments; how they interact with private equity (PE) sponsors; and how they view the future of the market. Respondents provide primarily cash-flow-based loans and believe that they finance companies and leverage levels that banks would not fund. Direct lending funds target unlevered returns that appear high relative to their risk. They use leverage in their funds, but appreciably less than banks and collateralized loan obligation funds (CLOs). They use and negotiate for both financial and negative covenants to monitor their investments. The presence of PE sponsors helps them lend more and craft more effective covenants. U.S. and European funds are similar along many dimensions, but European funds rely less on PE sponsors and compete more with banks. Overall, the private debt market is both different from and shares characteristics with bank loan and syndicated loan markets. (JEL G23, G30, G32) [ABSTRACT FROM AUTHOR]

This study conducts a citation-based comprehensive systematic literature review (SLR) of the syndicated loan market by identifying and recognizing the sources of knowledge-producing leading articles, journals and authors in this area. In total, we present a citation analysis of 374 articles from the Scopus database using a comprehensive list of keyword searches. We find that the importance of research using syndicated loan data has increased after the global financial crisis (GFC). It is perhaps due to the reason that the GFC was mainly a credit crisis that sparked the interest of research in this area. We identify the Journal of Financial Economics as the leading journal in terms of citation and the Journal of Banking and Finance in terms of publication count. Victoria Ivashina comes out as the leading author in terms of the citation count and Anthony Saunders in terms of publication count. We also perform a content analysis of the top 100 most cited papers and identify data characteristics, major themes, estimation techniques and empirical approaches. Our SLR provides a macro picture of research on syndicated loan studies. Finally, we provide an overview of the direction for future research. [ABSTRACT FROM AUTHOR]

We investigate whether lead arrangers opportunistically withhold their private information from participant lenders and how this behavior affects the structure of loan syndicates. Using the setting of Food and Drug Administration (FDA) inspections and the exogenous shock to the inspection disclosure regime with the passage of the Open Government Initiative (OGI), we show that, following bad inspection outcomes, lead arrangers retain a larger loan share in the post-OGI period, when inspection outcomes are publicly disclosed by the FDA, compared to in the pre-OGI period, when there is no public disclosure. We also find that during the pre-OGI period, lead arrangers retain a lower loan share when a loan is issued following bad inspection outcomes compared to clean inspection outcomes. This effect is stronger when lead arrangers are more likely to be informed (as measured by their prior experience submitting Freedom of Information Act (FOIA) requests to the FDA and a higher inspection materiality) and when syndicate participants are less likely to be informed (as measured by their lack of prior FDA FOIA requests and lead arranger experience, and by the lack of borrowers' voluntary disclosure of inspection outcomes). Our findings of the deterioration in borrowers' performance following bad inspection outcomes and lead arrangers' reputational losses in the post-OGI period further indicate lead arrangers' opportunistic behavior. Overall, our results provide robust evidence that lead arrangers exploit their informational advantage at the expense of participant lenders. [ABSTRACT FROM AUTHOR]

We study the effect of bank competition on the design of syndicate loans. We find that competition in the lead lender's market plays a significant role in determining the terms of the syndicate loans. Specifically, higher concentration leads to higher yield spreads, larger issues, shorter maturities, greater contract intensity, and more collateral requirements, but with a greater likelihood of performance pricing. We also find the prior banking relationships, anti‐takeover provisions and whether the lead bank is a national, regional, or state bank influence the designs of these loans. [ABSTRACT FROM AUTHOR]

Using a dataset on syndicated loan primary market pricing adjustments, we examine whether relationship banks' information advantage facilitates price discovery in loan issuances. We find that the lead bank makes fewer adjustments to the initial pricing terms of a syndicated loan and shortens the syndication time when it has a stronger relationship with the borrower. A stronger relationship also reduces loan underpricing. A relationship lead bank relies less on information from syndicate members. Exogenous shocks to relationships caused by bank mergers and closures confirm our findings. We contribute to the literature by showing that relationship lending improves loan pricing efficiency. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4730. [ABSTRACT FROM AUTHOR]

The 2011 Budget Control Act eliminated the in-school interest subsidy for graduate and professional students borrowing under the Stafford Loan Program. As a result, starting on July 1, 2012, graduate and professional students borrowing Stafford Loans became responsible for the interest accruing during their in-school deferment period. This study assesses the effect of this de-subsidization on students' compositional attributes (e.g. gender, ethnicity, income), borrowing behaviors (e.g. extensity or participation in and intensity or magnitude of borrowing), total annual amounts borrowed, sources of lenders, and anticipatory effects (i.e., changes in borrowing behaviors based on the knowledge of policy change before this policy was implemented). To address this goal, we relied on repeated cross-sectional data drawn from three iterations of the National Postsecondary Student Aid Study. We found evidence of compositional changes that signaled a reduction of white and an increase of first-generation in college for graduate students. We found no evidence of declines in student loan participation; however, we found anticipatory effects with about 45,000 (6%) graduate and professional students maxing out their allowed Stafford amounts before July 2012, a strategy that allowed graduate students continuing graduate school enrollment to be grandfathered this subsidy into the new policy era. Although debt burden increased by 3.86% post-policy, effect heterogeneity tests indicated that law students decreased their total debt amounts by 18.8%, with 83% of this reduction resulting from borrowing less from Stafford loans. [ABSTRACT FROM AUTHOR]

Profit participation loans are a viable financing alternative, especially for SMEs and start-ups. The multiplicity of features they present --variable interest, participation of the lender, the possibility of early repayment, and subordination or consideration as equity--, make them an attractive yet complex instrument. They are worth analyzing for two main reasons; the first is the legal consequences they may have on companies, while the second is the accounting implications of treating these loans as equity in accordance with Royal Decree-Law 7/1996, and whether it is possible to make a more extensive interpretation of its dispositions to include cases not specifically mentioned in the law. [ABSTRACT FROM AUTHOR]

This paper explores the informational role of the Loan Only Credit Default Index (LCDX) on the pricing of syndicated loans. Despite an extensive body of research on credit indices and loan pricing, limited studies have comprehensively assessed the complex relationship between the LCDX and individual loan spreads. Contrary to indices like the CDX, which are largely linked to corporate bonds, the LCDX directly pertains to the syndicated secured loan market, offering valuable insights about the overall credit default market and the cost of credit risk insurance. Preliminary results reveal a pronounced positive correlation between the LCDX spread and the syndicated loan spread, particularly noticeable amongst borrowers with lower credit quality. The paper highlights the LCDX's pivotal role in conveying secondary credit market information, with critical implications for credit risk management and financial regulations. [ABSTRACT FROM AUTHOR]

The syndicated lending market is one of the main financing sources for the development of the Russian economy. This article is dedicated to the processes managerial decision-making within the framework of syndicated lending transactions by borrowers, lenders and investors. Thanks to the use of market tools, borrowers get the opportunity to form an optimal structure for solving various tasks of corporate finance. Taking into account the adoption of managerial decisions by borrowers, the analysis of the following options for such decisions is presented: the choice of a bank for the role of a credit manager and the appointment of a legal adviser to the borrower. Lenders of syndicated lending transactions, making decisions on participation in transactions in the primary syndicated lending market, use the opportunity to share the specialized risks of syndicated transactions within the syndicate. Decisions that are made by the lenders include determining the commercial terms of participation in a syndicated loan in the primary market and approving these terms in accordance with the bank’s business processes. Investors active in the secondary syndicated lending market form their portfolios by making decisions regarding the following financial parameters of their transactions: the amount of the acquired/assigned interest in the syndicated lending participation and the transaction price. The paper concludes The article concludes that it is important for syndicated lending market participants to make optimal decisions, taking into account the role of market instruments in financing development projects of Russian corporations.

Firms with greater shareholder rights have a greater risk-shifting incentive, requiring more lender monitoring. Thus, a reduction in shareholder rights implies more diffused (less monitoring-intensive) loan syndicates. Using the passage of U.S. second-generation antitakeover laws as an exogenous shock that reduces shareholder rights as a natural experiment, we find that loan syndicates become significantly more diffuse after the passage of these laws. These results are confirmed in a large sample of bank loans made during the 1990–2007 period when the loan syndicate market matured. Our results show how corporate governance causally affects financial contracting and creditor control in firms. [ABSTRACT FROM AUTHOR]

We investigate whether and how banks in the global syndicated loan market adjusted the pricing and supply of credit to account for higher climate transition risk (CTR) in the years following the 2015 Paris Agreement. We measure CTR by considering the pollution levels of borrowers and the engagement of countries where borrowers are headquartered in addressing climate change issues. The evidence is mixed and points to nonlinear relations between lending variables and CO2 emissions. Policy events such as the Paris Agreement and government environmental awareness are significant climate risk drivers that, when combined, may amplify banks' perception of CTR. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the relationship between executive pay disparity and the cost of debt. Design/methodology/approach: The authors use a sample of syndicated bank loans granted to United States (US) listed firms from 1992 to 2014 and adopt the loan yield spread (Chief Executive Officer (CEO) pay slice) as the main proxy for the cost of debt (executive pay disparity). The authors also use the Heckman two-stage model to address the sample selection bias and the two-stage least squares and propensity score matching methods to control the potential endogeneity issues. To test different views about executive pay disparity, the authors adopt the cash-to-stock ratio to proxy for managerial risk-shifting incentives. Findings: The authors find that the cost of debt is significantly higher for firms with larger executive pay disparity, which is robust to sample selection bias, endogeneity concerns, alternative measures and various controls. This positive relationship increases with the risk-shifting incentives of CEOs instead of other top executives, which supports the managerial power view, and is stronger for firms with higher levels of financial distress. The findings suggest that creditors view executive pay disparity are associated with higher credit risk and CEO entrenchment. Originality/value: This paper reveals one "dark" side of executive pay disparity: it increases the cost of debt and identifies a significant role played by CEOs' risk-shifting incentives. The authors provide direct evidence of the relevance of pay differential to corporate credit analysis. [ABSTRACT FROM AUTHOR]

The lead arrangers of syndicated loans often have lending relationships with the borrowers, while other lenders participating in the syndicate largely engage in an arm's length transaction. Relatively little is known about how these relationships affect the shares of syndicated loans that the lead arrangers retain in their portfolio. Using a random sample of 10,328 syndicated loans made to 7316 nonfinancial U.S. firms over the period 1987 to 2013, this paper investigates the impact of lending relationships on the shares of loans retained. The results show that lending relationships are associated with a significant reduction in retained shares. These results are robust to alternative estimation techniques, such as propensity score matching and binary endogenous treatment models, which are employed to address endogeneity concerns. Furthermore, the results provide additional evidence that the existence and strength of lending relationships lead to decreased retained shares, particularly for non-top-tier lead arrangers. Moreover, the findings also demonstrate that when lead arrangers have lending relationships with borrowers, they retain significantly smaller shares whether the loans are made to informationally opaque, small, or speculative-grade-rating firms. Overall, the findings of this paper have important implications for lenders seeking to reduce their risk exposure in syndicated loans. [ABSTRACT FROM AUTHOR]

The tax exemption of interest revenues and the high level of professional secrecy were the unique selling points of Luxembourg for the German banking community. From the 1960s to the 1990s, they were the main causes for the rise of Luxembourg to one of the biggest euromarket places. The government of Luxembourg used these institutional factors to foster and accelerate the economic transformation from an industrial to a post-industrial country. The German banks did not reduce or even discontinue their presence in Luxembourg after the end of tax exemption and strict banking secrecy. Instead, they specialized on syndicated loans, treasury functions and Private Wealth Management for wealthy clients. [ABSTRACT FROM AUTHOR]

Copyright of Jurnal Ilmu Hukum, Humaniora dan Politik (JIHHP) is the property of Dinasti Publisher and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

SUMMARY: While component auditors audit a significant proportion of public companies, lenders may not be aware of their involvement before Form AP disclosure. We study whether the disclosure of component auditor use and the extent of their involvement is useful to lenders. We find that the loan spread is higher when firms' lead auditors use component auditors relative to engagements without component auditor participation. Further, for firms whose lead auditors use component auditors, we find a positive association between the extent of such participation and the loan spread. However, the positive effect of component auditor use on the loan spread is mitigated for firms with a high level of foreign operations, consistent with the notion that the use of component auditors is more beneficial for firms with significant foreign operations. Overall, our findings suggest that the disclosure of information on component auditor participation in global group audits is useful to lenders. Data Availability: All data used in this paper are publicly available. JEL Classifications: M42; G32. [ABSTRACT FROM AUTHOR]

Chief Executive Officer (CEO) contractual protection, in the forms of CEO employment agreements and CEO severance pay agreements, is prevalent among S&P 1500 firms. While prior research has examined the impact of these agreements on corporate decisions from shareholders' perspective, there is little research on the impact from debt holders' perspective. We find that, compared with other loans, loans issued by firms with CEO contractual protection on average contain more performance covenants and performance‐pricing provisions. This effect increases with CEOs' risk‐taking incentives and opportunities, but it decreases with CEOs' preference for and opportunity of enjoying a quiet life. Furthermore, for loans issued by firms with CEO contractual protection, debt holders include stricter covenants, charge a higher interest rate and use a more diffuse syndicate structure. Collectively, these results shed light on the impact of CEO contractual protection on debt contracting. [ABSTRACT FROM AUTHOR]

We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identification, we exploit a supervisory credit register of syndicated loans, loan-time fixed effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation is associated with important adverse effects during the 2008 crisis: loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility. [ABSTRACT FROM AUTHOR]

This article studies whether debt renegotiation mitigates debt overhang and increases corporate investment. Using mergers between lenders participating in the same syndicated loans as natural experiments that reduce the number of lenders and thus make renegotiation easier, I find that the firms affected by the mergers become more likely to renegotiate the loans and increase capital investment. The effect is stronger for firms with higher Q and firms in financial distress, supporting the hypothesis that the lender mergers mitigate the debt-overhang problem. [ABSTRACT FROM AUTHOR]

In this article, the author explores the emergence of the green loan financing market in the Middle East following the publication of the "Green Loan Principles" and accompanying guidance by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications and Trading Association. This article provides an overview of the substance of the principles and includes first-hand practitioner's insight on how these principles are being reflected in green loan documentation in the debt financing market. [ABSTRACT FROM AUTHOR]

I examine whether tax return information is useful to equity investors. I do so indirectly, by exploiting unique features of the syndicated loan market, as evidence shows that lenders obtain tax returns from borrowers and that lenders' private information is transmitted to equity markets when institutional investors are part of a loan syndicate. I find significant increases in tax expense valuation and decreases in tax-related market anomalies following the issuance of institutional syndicated loans, suggesting that equity investors find information about firm performance in tax returns that is useful for their trading decisions. I also find evidence suggesting that institutional investors may determine their loan syndicate participation in part based on the value of tax return information. This study extends prior research and informs policy debates over public disclosure of corporate tax return information by providing evidence to support that tax returns can be useful to investor decision making. [ABSTRACT FROM AUTHOR]

We study the effects of analyst coverage on syndicated lending. We hypothesize that analyst research alleviates information asymmetries between lead arrangers and participant lenders within a syndicate, increasing the participants' credit supply and reducing the required loan interest spread. Using exogenous shocks to firms' analyst coverage, we find that firms pay higher loan interest spreads and that participant lenders fund smaller fractions of the loans after firms experience a reduction in analyst coverage. Participants are more likely to be nonbank institutional investors and to transact with familiar lead arrangers after the coverage shocks. [ABSTRACT FROM AUTHOR]

This paper provides evidence that the formation of global supply chain partnerships leads to an increased usage of cross‐border financing. The findings are detected in all three major financing markets—equities, syndicated loans, and public debt. Difference‐in‐differences tests allow us to draw a causal interpretation of our main findings, which also holds in several robustness tests. Our findings suggest that increased cross‐border financing reflects greater ability to access global financial markets, due to enhanced firm visibility and investor attention, as well as operational forces that arise when establishing new global supply chain partnerships. Specifically, we provide evidence that firms that are small, held less by institutional investors, and followed by fewer analysts have more benefits in cross‐border financing from the formation of the global supply chain. Our findings have important implications for firms attempting to integrate into the global supply chain network. More broadly, our findings suggest that the information generated by operational activities can have significant effects on subsequent financing activities. [ABSTRACT FROM AUTHOR]

We investigate whether access to the collateralized loan obligation (CLO) market as collateral managers or underwriters affects lenders' ability to overcome an idiosyncratic adverse shock in the corporate lending market. In a triple difference‐in‐differences setting, we find that lenders decrease their origination of loans following a negative shock; however, those with CLO access become more likely to arrange deals with securitizable facilities (Term B). Moreover, they choose to arrange deals with smaller size on‐balance‐sheet lending (Term A). The results suggest that securitization is actively used by lenders to switch to off‐balance‐sheet lending and to reduce the risk retained on the balance sheet. [ABSTRACT FROM AUTHOR]

Given bank debt is a critical financing source for real estate investment trusts (REITs), understanding how REIT banking relationships facilitate their borrowing costs becomes crucial. This research focuses on REIT syndicated loan facilities and investigates how banking relationships affect REIT loan pricing over the 1987–2015 period. We find that banking relationships on average lower syndicated loan spreads by at least 13.53 basis points. This reduction in spread for relationship loans versus non-relationship loans holds for the periods before the subprime crisis, during the crisis, and after the crisis. The result indicates that the financial crisis increases the borrowing cost for REITs with banking relationships by 59.36 basis points, while it increases by 95.92 basis points for REITs without banking relationships. We further examine the cost for public debt and the underpricing for season equity offerings (SEOs). During the non-crisis periods, banking relationships help reduce the borrowing cost of public debt by around 34 basis points. In addition, during the crisis period, the degree of SEO underpricing for REITs with prior banking relationships is significantly lowered (13.2%) compared to REITs without banking relationships. [ABSTRACT FROM AUTHOR]

In countries with less developed capital markets, bond and equity financing are a limited alternative to bank loans for firms needing large loans. 1 The syndicated loan market is seen as a way of circumventing this problem. This paper analyses syndicated loan facilities in emerging Europe as an alternative form of financing compared to debt and equity issues. Using data on 1004 syndicated loan deals granted to borrowers from 12 Central, Eastern and South-Eastern European countries from the Thomson One Banker database, we provide evidence on the evolution of the syndicated loan market over time. The functioning and the mechanics of syndicated loan deals are described, with an emphasis on the advantage and disadvantages of this source of financing for both borrowers and lenders. Furthermore, we analyse the main features of syndicated loan deals - loan size and loan spreads - by industry, loan purpose, loan type, loan grade and syndicate structure. We find syndicated loan terms (such as loan spread and size) to be sensitive to the macroeconomic environment of the country, economic cycles over time, syndicate structure as well as industry and loan types. The implication of these results is that governments should aim at increasing competition in the banking sector, addressing macroeconomic weaknesses as well as ensuring a proper enforcement of laws related to disclosure of financial information as there is indication that these improve syndicated loan terms. This will facilitate the expansion of the syndicated loan market that will contribute to the financing of firms and more general to the economic development of these countries. [ABSTRACT FROM AUTHOR]

This paper studies the impact of cultural integration on business cooperation in the Republican Era. We collect the composition of bank boards and directors' biographical details of 28 principal banks in China, compiling a panel dataset from 1921 to 1936. The data allows us to classify directors' merchant groups, a typical cultural reflection, thereby calculating the cultural difference at the bank‐pair level. Using the boards' cultural traits, we find cultural difference among bank boards is negatively related to their director‐sharing decisions, an indicator of inter‐bank cooperation. Also, cultural identity on boards facilitates banks to participate in loan syndicates with the yield and risk shared. Further composition tests show that cultural attitude towards clan orientation, trust and open spirit embedded in the business culture is the root of inter‐banking cooperation. The finding reveals the importance of informal institutions in financial development and contributes to the debate on cultural and institutional bifurcation between China and Europe. [ABSTRACT FROM AUTHOR]

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What is the economic role played by arrangers of leveraged loans, and what are the risks they face? We provide evidence that arrangers solve a demand discovery problem. Investors have incentives to feign little interest in the loan to obtain better terms. To deter such behavior, arrangers underprice hot deals and ration investors on cold deals. The risk associated with demand discovery is often shared between borrowers and arrangers. One implication is that to ration investors on cold deals, arrangers retain larger loan shares. This motive for retention is different from the monitoring incentive motive previously considered in the literature. [ABSTRACT FROM AUTHOR]

How do changes in banking regulation affect the syndicated loan market? Because branch networks and loan syndication both enable banks to diversify geographical credit risk, we investigate the staggered implementation of the Riegle–Neal Interstate Branching and Banking Efficiency Act of 1994. Exploiting that the act only changed the legal framework for out-of-state commercial banks, we find that branching deregulation decreased syndicated loan issuance but spurred bilateral lending to corporations. Consistent with a supply-driven substitution effect, this shift is also reflected in interest rate spreads. Our results suggest that changes to banking regulation can substantially alter credit allocation across loan types. [ABSTRACT FROM AUTHOR]

This article investigates the impact of political uncertainty on contractual lending terms using a large sample of syndicated loans and a within-firm estimation approach to achieve identification. Firms pay 7 basis points (bps) more on loans originated when their lenders are undergoing an election relative to when their lenders are not undergoing an election. Lenders from less financially developed countries are more likely to pass political uncertainty costs to borrowers. Consistent with electoral uncertainty driving this premium, the most contested elections have the largest impact (17 bps). Overall, political uncertainty leads to a tangible increase in firms' financing costs. [ABSTRACT FROM AUTHOR]

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From the perspective of risk contagion, it is difficult to balance the benefits and costs of banking globalization. We use data on cross-border syndicated loans intended to build heterogeneous credit networks among banking sectors in various countries to explore the introduction of banking risks into the network. Via social network analysis (SNA), we find that the global credit network has phased characteristics, and it is a source of exposure to global banking risks. However, the more important network position, that is, the greater centrality, identified shows that the banking industry is more stable. To explain these findings, we present and estimate the banking risk contagion model and the suppression effect model of contagion. Evidence suggests that the international credit network is the channel of risk contagion, and the long-term loan network and nonfinancial borrower network have a stronger contagion effect. Exogenous banking supervision and network endogenous closeness centrality can inhibit risk contagion. From a policy perspective, these findings indicate the need to supervise high-risk cross-border loans and maintain independence in the international credit network. The data that support the findings of this study are available from the corresponding author, [Heng Zhao, email: zhao0501@mail.dlut.edu.cn], upon reasonable request. • The global credit network has phased characteristics, and it is a source of exposure to global banking risks. • The long-term loan network and nonfinancial borrower network have a stronger contagion effect. • Exogenous banking supervision and network endogenous closeness centrality can inhibit risk contagion. [ABSTRACT FROM AUTHOR]

In the developed markets, good earnings quality could effectively reduce information asymmetries in loan syndication. However, our results shows that earnings quality plays a limited role in loan syndications in a market where the state has dominant power. Examining a sample of syndicated loans to Chinese corporate borrowers, we find that state ownership overrides the signaling role of earnings quality in alleviating the problems of adverse selection and moral hazard, as it provides an implicit guarantee of the loan repayment. Nonetheless, interestingly, firms with better earnings quality, regardless of their state ownership, are rewarded with more favorable loan price. Such an overriding role of state-ownership over syndicated loan contracting prevails even with the presence of foreign lender participation, which suggests that foreign banks seem to have followed the conventional wisdom that 'when in Rome, do as the Romans do'. [ABSTRACT FROM AUTHOR]

We examine the role of foreign lenders' national cultures in the pricing of syndicated loans. Using Schwartz's cultural dimensions, embeddedness, and mastery, we find that foreign lenders domiciled in countries with higher embeddedness and mastery scores offer lower interest rates. These findings are robust to a battery of robustness tests and incremental to the effects of formal institutions. We also document that greater information asymmetry and foreign lenders' bargaining powers strengthen the impact of the foreign lenders' cultural values on loan pricing. An additional analysis shows that the intensity of loan covenants is also negatively related to the embeddedness and mastery scores of the foreign lenders' countries of domicile. Our findings suggest that cross‐border debt contracting decisions are not only determined by objective judgments about risk and return but also depend on the subjective assertion of values and beliefs guided by informal institutions, such as cultural norms. Cultural values can nurture and shape economic incentives and perceptions of sophisticated professional bankers in increasingly globalized market settings, even when the financial stakes are substantial. [ABSTRACT FROM AUTHOR]

Abstract This paper examines how Chinese policy banks responded to China's Belt Road Initiative (BRI) using transaction‐level international syndicated loan data. Employing a difference‐in‐differences (DID) estimation, we show that Chinese policy banks increased aggregate lending (number of loans and loan amounts) to firms from the BRI countries compared to those from the non‐BRI countries after the initiative. This increase was more pronounced among firms along the continental route and in the infrastructure sectors. We also find that Chinese policy banks' loans to the BRI borrowers were associated with reduced spread, lowered collateral requirement, and extended maturity. Moreover, our results suggest that Chinese policy banks gave more support to firms from the BRI countries with weaker economic performance, more fragile institutional quality, and closer political interests. Overall, our study highlights the supportive role played by Chinese policy banks in implementing a national globalization strategy.