The Myth of the Lead Arranger’s Share

89 Pages Posted: 7 May 2020 Last revised: 3 Nov 2022

See all articles by Kristian Blickle

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York

Quirin Fleckenstein

New York University (NYU) - Leonard N. Stern School of Business

Sebastian Hillenbrand

Harvard University - Business School (HBS)

Anthony Saunders

New York University - Leonard N. Stern School of Business

Date Written: May 1, 2020

Abstract

We challenge theories that lead arrangers retain shares of syndicated loans to overcome information asymmetries. Lead arrangers frequently sell their entire loan stake—in over 50 percent of term and 70 percent of institutional loans. These selloffs usually occur days after origination, with lead arrangers retaining no other borrower exposure in 37 percent of selloff cases. Counter to theories, sold loans perform better than retained loans. Our results imply that information asymmetries could be lower than commonly assumed or mitigated by alternative mechanisms such as underwriting risk. We also provide guidance for Dealscan users on how to approximate loan ownership after origination.

Keywords: syndicated lending, loan sales, lead arranger

JEL Classification: G21, G24, G30

Suggested Citation

Blickle, Kristian and Fleckenstein, Quirin and Hillenbrand, Sebastian and Saunders, Anthony, The Myth of the Lead Arranger’s Share (May 1, 2020). FRB of New York Staff Report No. 922, Available at SSRN: https://ssrn.com/abstract=3594525 or http://dx.doi.org/10.2139/ssrn.3594525

Kristian Blickle (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Quirin Fleckenstein

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://www.quirinfleckenstein.com/

Sebastian Hillenbrand

Harvard University - Business School (HBS) ( email )

Boston, MA 02163
United States

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)

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