What’s My Share? The Acquisition of Borrower Accounting Reports by Syndicate Participant Lenders

53 Pages Posted: 30 Jan 2020 Last revised: 21 Nov 2022

See all articles by Sabrina Chi

Sabrina Chi

CSU Fullerton

Hengda Jin

Texas A&M University - Mays Business School

Edward Owens

University of Utah - David Eccles School of Business

Karen Ton

Villanova University

Date Written: May 2, 2022

Abstract

Economic theory suggests that it is efficient for participant lenders to delegate ex ante borrower screening to lead arrangers in syndicated loans, because it is costly for syndicate participant lenders to duplicate lead arranger efforts by directly collecting borrower information. However, such delegation introduces information risk between lead arrangers and participant lenders. We investigate whether syndicate participant lenders overcome this friction by independently obtaining borrower accounting reports to supplement the information provided by lead arrangers. Employing a sample of banks that use EDGAR, we find that an individual participant lender’s search of borrowers’ EDGAR filings during the syndication period is positively associated with that participant lender’s share of the loan at the end of the syndication period. Further tests provide evidence that the key mechanism is mitigation of lead arranger information risk. This novel evidence enhances our understanding of how participant lenders’ information acquisition facilitates deal formation in syndicated loan markets.

Keywords: syndicated loans, participant lenders, EDGAR, information risk

JEL Classification: D82, D83, G21, M40

Suggested Citation

Chi, Sabrina and Jin, Hengda and Owens, Edward and Ton, Karen, What’s My Share? The Acquisition of Borrower Accounting Reports by Syndicate Participant Lenders (May 2, 2022). Available at SSRN: https://ssrn.com/abstract=3513070 or http://dx.doi.org/10.2139/ssrn.3513070

Sabrina Chi

CSU Fullerton ( email )

Fullerton, CA
United States

Hengda Jin

Texas A&M University - Mays Business School ( email )

460S Wehner Building, 4353 TAMU
College Station, TX 77840
United States

Edward Owens (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
8015815732 (Phone)

Karen Ton

Villanova University ( email )

800 E. Lancaster Ave
Villanova, PA 19085
United States

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