'Brexit' and the Contraction of Syndicated Lending

39 Pages Posted: 23 Nov 2016

See all articles by Tobias Berg

Tobias Berg

Frankfurt School of Finance & Management

Anthony Saunders

New York University - Leonard N. Stern School of Business

Larissa Schäfer

Frankfurt School of Finance & Management

Sascha Steffen

Frankfurt School of Finance & Management

Date Written: November 18, 2016

Abstract

Using the syndicated loan market as a laboratory, we analyze the effect of the Brexit referendum on corporate loan origination. Issuances in the UK syndicated loan market dropped by 25% after the Brexit referendum relative to a set of comparable syndicated loan markets. We propose a new matching strategy – “Siamese Twins Matching” – to identify appropriate counterfactuals for the UK market. We further document a novel channel, market attractiveness, that plays an important role beyond standard demand and supply factors: firm-bank combinations that used to issue loans in both the UK market and other markets decrease their issuances in the UK market more than in other markets after the Brexit referendum. Our results help to understand the dynamics of competition between financial centers and the role of policy uncertainty shocks in this competition.

Keywords: Brexit, Syndicated Loans, Competition, Financial Centers

JEL Classification: G15, G20

Suggested Citation

Berg, Tobias and Saunders, Anthony and Schäfer, Larissa and Steffen, Sascha, 'Brexit' and the Contraction of Syndicated Lending (November 18, 2016). Available at SSRN: https://ssrn.com/abstract=2874724 or http://dx.doi.org/10.2139/ssrn.2874724

Tobias Berg

Frankfurt School of Finance & Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Larissa Schäfer (Contact Author)

Frankfurt School of Finance & Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Sascha Steffen

Frankfurt School of Finance & Management ( email )

Adickesallee
32-34
Frankfurt, 60322
Germany
16097326929 (Phone)

HOME PAGE: http://www.sascha-steffen.de

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