The Monitoring Incentive of Transactional and Relationship Lenders: Evidence from the Syndicated Loan Market

Asian Finance Association (AsFA) 2013 Conference

47 Pages Posted: 28 Jan 2013 Last revised: 28 Feb 2015

See all articles by Yutao Li

Yutao Li

University of Lethbridge

Anthony Saunders

New York University - Leonard N. Stern School of Business

Pei Shao

University of Lethbridge

Date Written: March 31, 2014

Abstract

We identify a group of lenders specializing in syndicating tradable loans (referred to as transactional lenders, “TLs”). We show that borrowers borrowing from TLs experience worse operating performance and more severe credit quality deterioration after loan origination compared to those borrowing from relationship lenders (“RLs”). This difference in the post-loan issue performance holds robust after controlling for the potential self-selection of the lender type, or using percentage of traded loans out of all syndicated loans to capture lenders’ propensity for syndicating tradable loans. Our results also remains qualitative the same after we drop various types of risky loans.

Keywords: Monitoring Incentive, Syndicated Loans, Secondary Loan Market, Transactional Lending, Relationship Banking

JEL Classification: G21, G23

Suggested Citation

Li, Yutao and Saunders, Anthony and Shao, Pei, The Monitoring Incentive of Transactional and Relationship Lenders: Evidence from the Syndicated Loan Market (March 31, 2014). Asian Finance Association (AsFA) 2013 Conference. Available at SSRN: https://ssrn.com/abstract=2207539 or http://dx.doi.org/10.2139/ssrn.2207539

Yutao Li

University of Lethbridge ( email )

Lethbridge, Alberta T1K5E8
Canada

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Pei Shao (Contact Author)

University of Lethbridge ( email )

4401 University Drive
Lethbridge, Alberta T1K 3M4
Canada

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