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http://ssrn.com/abstract=1571474
 
 

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Does Poor Performance Damage the Reputation of Financial Intermediaries? Evidence from the Loan Syndication Market


Radhakrishnan Gopalan


Washington University in Saint Louis - John M. Olin Business School

Vikram K. Nanda


Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Vijay Yerramilli


University of Houston, C. T. Bauer College of Business

November 1, 2010

Journal of Finance,Forthcoming

Abstract:     
We investigate the effect of poor performance on financial intermediary reputation by estimating the effect of large-scale bankruptcies among a lead arranger's borrowers on its subsequent syndication activity. Consistent with reputation damage, such lead arrangers retain larger fractions of the loans they syndicate, are less likely to syndicate loans, and are less likely to attract participant lenders. The consequences are more severe when borrower bankruptcies suggest inadequate screening or monitoring by the lead arranger. However, borrower bankruptcies have little effect on syndication activity of the most dominant lead arrangers, and in years in which many lead arrangers experience borrower bankruptcies.

Number of Pages in PDF File: 60

Keywords: Reputation, Loan Syndicates, Bankruptcies

JEL Classification: G20, G21

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Date posted: March 15, 2010 ; Last revised: November 5, 2010

Suggested Citation

Gopalan, Radhakrishnan and Nanda, Vikram K. and Yerramilli, Vijay, Does Poor Performance Damage the Reputation of Financial Intermediaries? Evidence from the Loan Syndication Market (November 1, 2010). Journal of Finance,Forthcoming. Available at SSRN: http://ssrn.com/abstract=1571474

Contact Information

Radhakrishnan Gopalan
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
Vikram K. Nanda
Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )
Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States
Vijay Yerramilli (Contact Author)
University of Houston, C. T. Bauer College of Business ( email )
Houston, TX 77204
United States
713-743-2516 (Phone)
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