Building Reputation on the Syndicated Lending Market: A Participant Bank Perspective

37 Pages Posted: 7 Dec 2013

See all articles by Marie-Hélène Broihanne

Marie-Hélène Broihanne

Strasbourg University, LaRGE Research Center, EM Strasbourg Business School

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Date Written: December 5, 2013

Abstract

Reputation of financial institutions is crucial for their activity and performance. Participant banks often rely on lead bank’s reputation in making future syndicated loan participation and lending decisions. We apply ordered probit regression techniques to a sample of more than 4,600 loans to investigate the determinants of participant banks reputation on the European syndicated lending market between 1999 and 2009. We find that the prestige of the lead bank in the first syndicate joined by a participant is crucial for his reputation. With a top 3 leader, participant reputation may increase by 85% while this effect drops to 30% when syndicating with a top 20 arranger. Establishing participant-lead bank relationships, developing a particular expertise in loan purpose or borrower industry, and funding very large deals also contributes to participant reputation. On the contrary, joining small club deals can be detrimental for reputation building.

Keywords: bank loans, reputation, syndicated lending, Europe, ordered probit regression

JEL Classification: G10, G21, G24, C25

Suggested Citation

Broihanne, Marie-Hélène and Godlewski, Christophe J., Building Reputation on the Syndicated Lending Market: A Participant Bank Perspective (December 5, 2013). Available at SSRN: https://ssrn.com/abstract=2364084 or http://dx.doi.org/10.2139/ssrn.2364084

Marie-Hélène Broihanne

Strasbourg University, LaRGE Research Center, EM Strasbourg Business School ( email )

PEGE
61 avenue de la Forêt Noire
Strasbourg, 67000
France

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

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