Loan Ownership and Liquidity in the Secondary Loan Market

Journal of Financial Services Research 63, 249–272, 2023.

53 Pages Posted: 14 Apr 2017 Last revised: 19 Sep 2023

See all articles by João A. C. Santos

João A. C. Santos

Federal Reserve Bank of New York; Nova School of Business and Economics

Pei Shao

Dhillon School of Business, University of Lethbridge

Date Written: April 2, 2018

Abstract

We find strong evidence that investor diversity is beneficial to loan liquidity: More diverse syndicates, as measured by the number of investor-types or the concentration of loan shares by investor-type, hold loans that have lower quoted bid-ask spreads in the secondary market.
These results are robust, and do not appear to be driven by investors’ borrower/loan selection.
Further, they are not driven by the presence of any particular type of investors. Our findings are consistent with Goldstein and Yang (J Financ 70:1723–1765 2015) insight that there is a strategic complementarity between different groups in trading on their information and producing information.

Keywords: Loan Syndicate, Investor Diversity, Informed Investors, Loan Market Liquidity

JEL Classification: G14, G21, G22, G23, G24

Suggested Citation

Santos, João A. C. and Shao, Pei, Loan Ownership and Liquidity in the Secondary Loan Market (April 2, 2018). Journal of Financial Services Research 63, 249–272, 2023., Available at SSRN: https://ssrn.com/abstract=2951451 or http://dx.doi.org/10.2139/ssrn.2951451

João A. C. Santos (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: http://HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

Pei Shao

Dhillon School of Business, University of Lethbridge ( email )

345 6 Ave SE
Calgary, Alberta T2G 4V1
Canada
+14033801845 (Phone)
T2G 4V1 (Fax)

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