Loan Syndication Networks
54 Pages Posted: 23 Dec 2018 Last revised: 5 May 2020
Date Written: May 4, 2020
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: Suggested Citation