Liquidity Risk and Syndicate Structure

40 Pages Posted: 13 Feb 2008 Last revised: 20 Mar 2022

See all articles by Evan Gatev

Evan Gatev

Simon Fraser University

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2008

Abstract

We offer a new explanation of loan syndicate structure based on banks' comparative advantage in managing systematic liquidity risk. When a syndicated loan to a rated borrower has systematic liquidity risk, the fraction of passive participant lenders that are banks is about 8% higher than for loans without liquidity risk. In contrast, liquidity risk does not explain the share of banks as lead lenders. Using a new measure of ex-ante liquidity risk exposure, we find further evidence that syndicate participants specialize in liquidity-risk management while lead banks manage lending relationships. Links from transactions deposits to liquidity exposure are about 50% larger at participant banks than at lead arrangers.

Suggested Citation

Gatev, Evan and Strahan, Philip E., Liquidity Risk and Syndicate Structure (February 2008). NBER Working Paper No. w13802, Available at SSRN: https://ssrn.com/abstract=1092852

Evan Gatev

Simon Fraser University ( email )

Burnaby, British Columbia V5A 1S6
Canada

Philip E. Strahan (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www2.bc.edu/~strahan

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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