Liquidity Risk and Syndicate Structure

47 Pages Posted: 25 Mar 2008

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: August 20, 2008

Abstract

We produce a comprehensive decomposition of syndicated loan risk into credit, market and liquidity risk and test how these shape loan syndicate structure. Banks dominate relative to onbank investors in loan syndicates that expose lenders to liquidity risk. This dominance is most pronounced when borrowers have high levels of credit or market risk. We then tie banks' comparative advantage in liquidity risk bearing to their access to transactions deposits by comparing investments across banks. The results suggest that risk-management considerations matter most for participants relative to lead arrangers. Links from transactions deposits to liquidity exposure, for instance, are more than 50% larger at participants than at lead arrangers.

Keywords: Liquidity Risk, Banks, Syndicates, Syndicated Loans

JEL Classification: G21, G20, G2

Suggested Citation

Gatev, Evan and Strahan, Philip E., Liquidity Risk and Syndicate Structure (August 20, 2008). AFA 2009 San Francisco Meetings Paper, 21st Australasian Finance and Banking Conference 2008 Paper, Available at SSRN: https://ssrn.com/abstract=1103234 or http://dx.doi.org/10.2139/ssrn.1103234

Evan Gatev (Contact Author)

Simon Fraser University ( email )

Burnaby, British Columbia V5A 1S6
Canada

Philip E. Strahan

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)

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Cambridge, MA 02138
United States

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