Analyst Coverage and Syndicated Lending
56 Pages Posted: 1 Sep 2021 Last revised: 10 Jan 2022
Date Written: December 28, 2021
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: Suggested Citation