Corporate Ownership Structure and Bank Loan Syndicate Structure

51 Pages Posted: 18 Dec 2010 Last revised: 22 May 2013

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Yue Ma

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Paul H. Malatesta

University of Washington - Michael G. Foster School of Business

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business

Date Written: March 7, 2011

Abstract

This paper examines the relation between corporate ownership structure and bank loan syndicate structure. We find that the divergence between control rights and cash-flow rights of a borrowing firm's largest ultimate owner has a significant impact on the concentration and composition of the firm’s loan syndicate. When the control-ownership divergence is large, lead arrangers form syndicates with structures that facilitate enhanced due diligence and monitoring efforts. These syndicates tend to be relatively concentrated and comprised of domestic banks that are geographically close to the borrowing firms and that have lending expertise related to the industries of the borrowers. We also examine factors that influence the relation between ownership structure and syndicate structure, including firm opacity, presence of multiple large owners, bank reputation, lending relationship, law and institution, and financial crises.

Keywords: Ownership Structure, Syndicated Loan, Excess Control Rights

Suggested Citation

Lin, Chen and Ma, Yue and Malatesta, Paul H. and Xuan, Yuhai, Corporate Ownership Structure and Bank Loan Syndicate Structure (March 7, 2011). Journal of Financial Economics (JFE), Vol. 104, No. 1, 2012; AFA 2012 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1727752 or http://dx.doi.org/10.2139/ssrn.1727752

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Yue Ma

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/yuema24

Paul H. Malatesta (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Drive
Irvine, CA California 92697-3125
United States

HOME PAGE: http://yuhai.merage.uci.edu/

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