Loan Syndication Structures and Price Collusion

50 Pages Posted: 9 Oct 2018  

Jian Cai

Washington University in St. Louis

Frederik Eidam

Centre for European Economic Research (ZEW)

Anthony Saunders

New York University - Leonard N. Stern School of Business

Sascha Steffen

Frankfurt School of Finance & Management

Date Written: March 13, 2018

Abstract

How does the organizational form of loan syndicates evolve and what are the effects on price collusion? We develop a novel measure of distance in lending expertise among syndicate lenders, and relate this novel measure to the organizational form of loan syndicates and loan pricing. Studying the U.S. syndicated loan market from 1989 to 2017, we find that the organizational form of loan syndicates significantly varies across our lender measure based on similar specializations in lending which we call syndicated distance. Large lead arrangers prefer to form close and concentrated syndicates by letting lenders with similar lending expertise into their syndicates and allocating those lenders higher loan shares. Analyzing loan pricing, we find that concentrated syndicates possess improved screening abilities, but collude on loan pricing. Consistent with Hatfield et al. (2017), we find however that price collusion of concentrated syndicates only occurs during periods of low market concentration. Our findings imply that both the organizational form of loan syndicates and the level of market concentration affect price collusion.

Keywords: Syndicated Loans, Loan Syndication Structure, Loan Pricing, Price Collusion

Suggested Citation

Cai, Jian and Eidam, Frederik and Saunders, Anthony and Steffen, Sascha, Loan Syndication Structures and Price Collusion (March 13, 2018). Available at SSRN: https://ssrn.com/abstract=3250817 or http://dx.doi.org/10.2139/ssrn.3250817

Jian Cai

Washington University in St. Louis ( email )

Frederik Eidam

Centre for European Economic Research (ZEW) ( email )

L 7,1
Mannheim, 68161
Germany
+496211235330 (Phone)

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)

Sascha Steffen (Contact Author)

Frankfurt School of Finance & Management ( email )

Sonnemannstr. 9 -11
Frankfurt, 60314
Germany

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

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