Academic Commons

Theses Doctoral

Relationship Lending in Syndicated Loans: a Participant’s Perspective

Li, Xinlei

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.

Files

  • thumnail for Li_columbia_0054D_13999.pdf Li_columbia_0054D_13999.pdf application/pdf 756 KB Download File

More About This Work

Academic Units
Business
Thesis Advisors
Ferri, Fabrizio
Degree
Ph.D., Columbia University
Published Here
July 20, 2017
Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.