Development Banks and the Syndicate Structure: Evidence From a World Sample

Abstract

Do development banks influence the syndicate structure? Using a global dataset of 12,322 syndicated loans from 2001 to 2016 across 78 countries, we show that the lead banks decrease their loan shares and form less concentrated structure in mixed syndicates including both development banks and private-sector banks as participant lenders. In line with the social view on the role of development banks, we find that such an effect is stronger during periods of financial instability, particularly for the green industry and in the case of borrowers that are financially constrained. Conversely, we do not find any evidence that mixed syndicates exhibit a different syndicate structure for political distortions. Finally, we find that mixed syndicates are not associated with higher covenant violations and increasing of the borrowers’ risk profile after the loan origination. Our results are robust when accounting for relationship lending, asymmetric information within the syndicate, lenders’ lending expertise, borrowers’ opacity, types of loan, and ranking hierarchy in the syndicate among the others.

Keywords: Syndicated loan market, Syndicate structure, Development banks, Loan-level data

JEL Classification: D82, G21, G28