The Agency Structure of Loan Syndicates

50 Pages Posted: 6 May 2005

See all articles by Franck Missonier-Piera

Franck Missonier-Piera

University of Geneva - Graduate School of Business (HEC-Geneva); University of Geneva (HEC-Geneva)

Pascal Francois

HEC Montreal - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2005

Abstract

The aim of this paper is to analyze the agency structure of loan syndicates in light of two alternative hypotheses. On one hand, the specialization hypothesis, consistent with Das and Nanda (1999), claims that multiple co-agents arise in loan syndicates because of the different competitive advantages they have for performing all the administrative tasks. On the other hand, the monitoring hypothesis states that multiple co-agents in loan syndicates are the result of the delegation of monitoring that mitigates informational asymmetry problems, as put forward by Strausz (1997). These alternative explanations induce different correlations between the agency structure of the syndicate and observable characteristics of the syndicated loan agreement. We derive testable implications and test them using the large-scale Dealscan database. We find strong evidence supporting the specialization hypothesis whereas results concerning the monitoring hypothesis are mixed.

Keywords: banking, loan syndication, specialization, monitoring

JEL Classification: G21

Suggested Citation

Missonier-Piera, Franck and Francois, Pascal, The Agency Structure of Loan Syndicates (March 31, 2005). Available at SSRN: https://ssrn.com/abstract=714741 or http://dx.doi.org/10.2139/ssrn.714741

Franck Missonier-Piera

University of Geneva - Graduate School of Business (HEC-Geneva) ( email )

40 bd Du Pont d'Arve
Geneva, 1211
Switzerland

University of Geneva (HEC-Geneva) ( email )

40 bd Du Pont d'Arve
Geneva, 1211
Switzerland

Pascal Francois (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-7743 (Phone)
514-340-5632 (Fax)

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