Relationship Banking and Loan Syndicate Structure: The Role of Private Equity Sponsors

48 Pages Posted: 29 Oct 2015 Last revised: 25 Sep 2020

See all articles by Rongbing Huang

Rongbing Huang

Kennesaw State University - Michael J. Coles College of Business

Donghang Zhang

University of South Carolina

Yijia (Eddie) Zhao

University of Massachusetts Boston - College of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 2, 2017

Abstract

Using a sample of syndicated loans to private equity (PE)-backed IPO companies, we examine how a third-party bank relationship influences the syndicate structure of a loan. We find that a stronger relationship between the lead bank and the borrower’s PE firm enables the lead bank to retain a smaller share of the loan and form a larger and less concentrated syndicate, especially when the borrower is less transparent. A stronger PE-bank relationship also attracts greater foreign bank participation. Our findings suggest that the lead bank’s relationship with a large equity holder of the borrower facilitates information production in lending.

Keywords: Third-Party Banking Relationship, Information Asymmetry, Private Equity, Syndicate Structure, IPO

JEL Classification: G21, G23

Suggested Citation

Huang, Rongbing and Zhang, Donghang and Zhao, Yijia, Relationship Banking and Loan Syndicate Structure: The Role of Private Equity Sponsors (June 2, 2017). Available at SSRN: https://ssrn.com/abstract=2681949 or http://dx.doi.org/10.2139/ssrn.2681949

Rongbing Huang

Kennesaw State University - Michael J. Coles College of Business ( email )

560 Parliament Garden Way
Mail Drop #0403
Kennesaw, GA 30144
United States

Donghang Zhang (Contact Author)

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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