Information Efficiency or Hold-up with Universal Banks? Some Evidence from Lending after Equity Underwriting

61 Pages Posted: 24 Jan 2021

See all articles by Gerard Pinto

Gerard Pinto

affiliation not provided to SSRN

Donghang Zhang

University of South Carolina

Date Written: November 19, 2020

Abstract

We find that spreads on loans originated by lenders affiliated to the IPO underwriters (informed lenders) are 12 basis points (bps) higher than loans originated by unaffiliated (uninformed) lenders. The price of these affiliated post-IPO loans is 59 bps higher than that of those unaffiliated loans when they start trading on the secondary market, suggesting too high a spread for affiliated loans. Loans around the SEO window also have higher spreads when they are originated by SEO underwriters. Our results for both IPOs and SEOs support the hold-up hypothesis of informed lenders exploiting private information to earn economic rents.

Keywords: Hold-up, Syndicated Loan, IPO, SEO, Informational Rent

JEL Classification: G21, G23

Suggested Citation

Pinto, Gerard and Zhang, Donghang, Information Efficiency or Hold-up with Universal Banks? Some Evidence from Lending after Equity Underwriting (November 19, 2020). Available at SSRN: https://ssrn.com/abstract=3741393 or http://dx.doi.org/10.2139/ssrn.3741393

Gerard Pinto

affiliation not provided to SSRN

Donghang Zhang (Contact Author)

University of South Carolina ( email )

1014 Greene Street
Darla Moore Sch
Columbia, SC SC 29208
United States
8037770242 (Phone)
29208 (Fax)

HOME PAGE: http://https://sc.edu/study/colleges_schools/moore/directory/zhang_donghang.php

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