Bank Monitoring: Evidence from Syndicated Loans
51 Pages Posted: 30 Aug 2016 Last revised: 8 Jul 2017
Date Written: July 7, 2017
Using two new measures of bank monitoring, we examine the determinants of syndicated loan monitoring. Lenders conduct active monitoring, such as borrower meetings or site visits, on 20% of loans and demand information at least on a monthly basis for 50% of loans. Both monitoring measures are positively related to the lead arranger's loan share and negatively related to loan maturity, borrower public status, and covenant use. Consistent with monitoring generating actionable information, active monitoring is positively related to future covenant violations and changes in loan characteristics, while lenders demand borrower information more frequently as borrower financial health deteriorates.
Keywords: Bank Lending, Bank Monitoring, Syndicated Loans
JEL Classification: G21
Suggested Citation: Suggested Citation