Taking the Lead: When Non-Banks Arrange Syndicated Loans
Abstract
In the mid-1990s, institutional investors entered the syndicated loan market and started to serve borrowers as lead arrangers. Why are non-banks able to compete for this role against banks? How do the composition of syndicates and loan pricing differ among lead arrangers? By using a dataset of 12,847 leveraged loans between 1997 and 2012, I aim to answer these questions. Non-banks benefit from looser regulatory requirements, have industry expertise which helps them in the screening and monitoring of borrowers and focus on firms that ask for loans only instead of additional cross-selling of other services. I can show that non-banks specialize on more opaque and less experienced borrowers, are more likely than banks to choose participants that help to reduce potentially higher information asymmetries and earn 105 basis points more than banks.
Research Area
Corporate Finance
Keywords
non-bank lead arrangers, syndicated loans, spread premium
JEL Classification
G21, G23, G32
Topic
Corporate Governance
Corporate Finance
Stability and Regulation
Corporate Finance
Stability and Regulation
Relations
1
Publication Type
Working Paper
Link to Publication
Collections
- LIF-SAFE Working Papers [334]