Analyst Coverage and Syndicated Lending

56 Pages Posted: 1 Sep 2021 Last revised: 10 Jan 2022

See all articles by Nicholas Hallman

Nicholas Hallman

University of Texas at Austin

John S. Howe

University of Missouri at Columbia - Department of Finance

Wei Wang

Temple University - Department of Accounting

Date Written: December 28, 2021

Abstract

We study the effects of analyst coverage on syndicated lending. We hypothesize that analyst research alleviates information asymmetries between lead arrangers and participant lenders within a syndicate, increasing the participants’ credit supply and reducing the required loan interest spread. Using exogenous shocks to firms’ analyst coverage, we find that firms pay higher loan interest spreads and that participant lenders fund smaller fractions of the loans after firms experience a reduction in analyst coverage. Participants are more likely to be nonbank institutional investors and to transact with familiar lead arrangers after the coverage shocks.

Keywords: Sell-side Analysts; Syndicated lending; Intra-syndicate information asymmetry; Exogenous shock

JEL Classification: G21; G24; G3

Suggested Citation

Hallman, Nicholas and Howe, John S. and Wang, Wei, Analyst Coverage and Syndicated Lending (December 28, 2021). Available at SSRN: https://ssrn.com/abstract=3896494 or http://dx.doi.org/10.2139/ssrn.3896494

Nicholas Hallman

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

John S. Howe

University of Missouri at Columbia - Department of Finance ( email )

224 Middlebush Hall
Columbia, MO 65211
United States
573-882-5357 (Phone)
573-884-6296 (Fax)

Wei Wang (Contact Author)

Temple University - Department of Accounting ( email )

Alter Hall 450
1801 Liacouras Walk
Philadelphia, PA 19122
United States

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