Loan Syndication Networks

54 Pages Posted: 23 Dec 2018 Last revised: 5 May 2020

See all articles by Jeffrey H. Harris

Jeffrey H. Harris

American University - Department of Finance and Real Estate

Edwin Hu

New York University School of Law

Ioannis Spyridopoulos

American University, Kogod School of Business

Date Written: May 4, 2020

Abstract

Banks develop network connections through co-syndication relationships with multiple lenders. We create measures of network centrality based on banks' historical co-syndication ties and find that well-connected lenders are more likely to gain lead underwriter status and offer better loan terms. The results are robust to variation in networks generated by the transferring of firms' lending relationships after bank consolidations. Well-connected banks offer lower spreads to firms with more information asymmetry, underwrite loans faster, and retain less loan ownership. The evidence is more consistent with theory suggesting that networks mitigate information asymmetry in syndicates rather than by superior screening or monitoring.

Keywords: Bank networks, Underwriter syndicates, Loan terms, information asymmetry

JEL Classification: L14, G21

Suggested Citation

Harris, Jeffrey H. and Hu, Edwin and Spyridopoulos, Ioannis, Loan Syndication Networks (May 4, 2020). Available at SSRN: https://ssrn.com/abstract=3295980 or http://dx.doi.org/10.2139/ssrn.3295980

Jeffrey H. Harris

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-6669 (Phone)

Edwin Hu

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Ioannis Spyridopoulos (Contact Author)

American University, Kogod School of Business ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States

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