Less Informed Lenders and Signaling: Evidence from Syndicated Loans

Posted: 6 Mar 2014

See all articles by Fumio Akiyoshi

Fumio Akiyoshi

Osaka University of Economics

Naoaki Minamihashi

Göteborg University

Katsutoshi Shimizu

Nagoya University

Date Written: March 5, 2014


This paper empirically studies how less informed lender wins the position of lead arranger in syndicated loans. We investigate the hypothesis that such lender signals loan quality by restricting deal size to less than that of the most informed lender. Since the less informed lender has smaller stakes in outstanding sole-lender loans than the most informed does, a large deal size may signal that the deal is excessively risky. Deal size works as a signaling device because cost of originating risky loans depends on each lender's amount of outstanding loans. We provide supportive evidence and argue that substantial signaling cost is the impediment to the less informed arrangers.

Keywords: Syndicated loan, Asymmetric information, Signaling, Relationship lending, Multinomial logit model

JEL Classification: G21; G28; G18; G01

Suggested Citation

Akiyoshi, Fumio and Minamihashi, Naoaki and Shimizu, Katsutoshi, Less Informed Lenders and Signaling: Evidence from Syndicated Loans (March 5, 2014). Asian Finance Association (AsianFA) 2014 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2404714 or http://dx.doi.org/10.2139/ssrn.2404714

Fumio Akiyoshi

Osaka University of Economics ( email )

2-2-8 Osumi

Naoaki Minamihashi

Göteborg University ( email )

Viktoriagatan 30
Göteborg, 405 30

Katsutoshi Shimizu (Contact Author)

Nagoya University ( email )

1 Furo-cho
Nagoya, 464-8601

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