Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans

Posted: 28 Sep 2004  

Amir Sufi

University of Chicago - Booth School of Business; NBER

Abstract

I empirically explore the syndicated loan market, with an emphasis on how information asymmetry between lenders and borrowers influences syndicate structure and on which lenders become syndicate members. Consistent with moral hazard in monitoring, the lead bank retains a larger share of the loan and forms a more concentrated syndicate when the borrower requires more intense monitoring and due diligence. When information asymmetry between the borrower and lenders is potentially severe, participant lenders are closer to the borrower, both geographically and in terms of previous lending relationships. Lead bank and borrower reputation mitigates, but does not eliminate, information asymmetry problems.

Keywords: Syndicated loans, information asymmetry, distance, Dealscan, syndicate structure, bank choice

JEL Classification: G21, G24, G32, D82

Suggested Citation

Sufi, Amir, Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans . Journal of Finance, 2006. Available at SSRN: https://ssrn.com/abstract=596202 or http://dx.doi.org/10.2139/ssrn.596202

Amir Sufi (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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