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

38 Pages Posted: 17 Jul 2018

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

Multiple version iconThere are 2 versions of this paper

Date Written: August 2018

Abstract

Using a sample of syndicated loans to private equity (PE)‐backed initial public offering 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, syndicated loan, syndicate structure, IPO

JEL Classification: G21, G23

Suggested Citation

Huang, Rongbing and Zhang, Donghang and Zhao, Yijia (Eddie), Relationship Banking and Loan Syndicate Structure: The Role of Private Equity Sponsors (August 2018). Financial Review, Vol. 53, Issue 3, pp. 461-498, 2018, Available at SSRN: https://ssrn.com/abstract=3214908 or http://dx.doi.org/10.1111/fire.12146

Rongbing Huang (Contact Author)

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

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

Donghang Zhang

University of South Carolina ( email )

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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 (Eddie) Zhao

University of Massachusetts Boston

100 William T Morrissey Blvd
Boston, MA 02125
United States

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