Working Paper: CEPR ID: DP17106
Authors: Mattia Colombo; Laura Grigolon; Emanuele Tarantino
Abstract: We investigate how common ownership between lenders affects the terms of syndicated loans. We conjecture that common ownership between lenders mitigates information asymmetries on the quality of the borrower. We theoretically and empirically show that high common ownership decreases loan rates, lowers the share of the loan retained by the lead bank, and mitigates rationing at issuance. Further investigations support the hypothesis that common ownership is an information transmission device: it especially affects the terms of loans to new borrowers, and, as information flows from the lead bank to syndicate members, member-to-lead common ownership does not affect credit conditions.
Keywords: Common Ownership; Syndicated Loans; Information Asymmetries
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High common ownership (G32) | Lower loan spreads (G21) |
| High common ownership (in upper quintiles) (G32) | Lower loan spreads (G21) |
| High common ownership (G32) | Lower share retained by lead banks (G21) |
| High common ownership (G32) | Increased intensity of lending relationships (G21) |
| Common ownership (G32) | Facilitates information transmission (L96) |