Bank Capital and Lending: Evidence from Syndicated Loans

56 Pages Posted: 4 Jul 2014 Last revised: 19 Aug 2021

See all articles by Yongqiang Chu

Yongqiang Chu

Belk College of Business, UNC Charlotte

Donghang Zhang

University of South Carolina

Yijia (Eddie) Zhao

University of Massachusetts Boston - College of Management

Date Written: May 29, 2017

Abstract

Using within-loan estimations to remove the impact of the demand side factors, we find that the capital levels of banks participating in the same syndicated loan are positively associated with the banks’ contributions to the loan. Consistent with the argument that higher capital reduces the cost of uninsured debt, the positive effect of bank capital on lending is stronger among banks that rely more on wholesale funding. Furthermore, we find that banks increase their contributions to syndicated loans after receiving TARP funding. Taken together, we provide new evidence on the importance and the causal effect of bank capital on lending.

Keywords: Bank Capital, Lending, Syndicated Loans, TARP

JEL Classification: G21, G38, G32

Suggested Citation

Chu, Yongqiang and Zhang, Donghang and Zhao, Yijia, Bank Capital and Lending: Evidence from Syndicated Loans (May 29, 2017). Available at SSRN: https://ssrn.com/abstract=2462377 or http://dx.doi.org/10.2139/ssrn.2462377

Yongqiang Chu (Contact Author)

Belk College of Business, UNC Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
7046877695 (Phone)

Donghang Zhang

University of South Carolina ( email )

1014 Greene Street
Darla Moore Sch
Columbia, SC SC 29208
United States
8037770242 (Phone)
29208 (Fax)

HOME PAGE: http://https://sc.edu/study/colleges_schools/moore/directory/zhang_donghang.php

Yijia Zhao

University of Massachusetts Boston - College of Management ( email )

100 Morrissey Blvd.
Boston, MA 02125
United States

HOME PAGE: http://sites.google.com/view/eddie-zhao/home

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