Syndicated Loans, Foreign Banking and Capital Market Development

24 Pages Posted: 16 Jul 2009

See all articles by Rainer F. H. Haselmann

Rainer F. H. Haselmann

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Paul Wachtel

New York University - Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2009

Abstract

In this paper we examine the role of syndicated loan markets in financial market development in 24 European countries. We find credit spreads to be negatively related to market size in small markets and positively related in large financial markets. Syndicated loans play a different role in large versus small financial systems. In small markets, loan syndications are a substitute for missing public debt markets, while in large financial markets loan syndicates enable arrangers to spread risk more efficiently. Foreign banks tend to reinforce this effect. In small markets, they transfer external finance across borders and in large markets they tend to take on more risky projects. Consequently, we find that characteristics of loan contracts arranged by foreign banks in small versus large markets differ considerably.

JEL Classification: F36, G15, G21, P34

Suggested Citation

Haselmann, Rainer F. H. and Wachtel, Paul, Syndicated Loans, Foreign Banking and Capital Market Development (January 31, 2009). Available at SSRN: https://ssrn.com/abstract=1434502 or http://dx.doi.org/10.2139/ssrn.1434502

Rainer F. H. Haselmann

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Mertonstrasse 17-25
Frankfurt am Main, D-60325
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paul Wachtel (Contact Author)

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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