Cultural differences and the structure of loan syndicates

Stefanie Kleimeier; Sajid M. Chaudhry

doi:10.1016/j.frl.2015.09.001

Cultural differences and the structure of loan syndicates

Stefanie Kleimeier
, Sajid M. Chaudhry

Aston Business School

Research output: Contribution to journal › Article › peer-review

7 Citations (Scopus)

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Abstract

Do cultural differences between lender and borrower affect the structure of the loan syndicate? Analyzing 8031 syndicated loans to US borrowers signed between 1986 and 2007, we find that lending shares are higher for foreign arrangers than domestic arrangers. Among foreign arrangers, lending shares further increase with cultural distance. We interpret this as a result of an increased moral hazard problem driven by higher information and effort costs faced by foreign arrangers. However, previous interactions between borrowers and arrangers can reduce moral hazard, hence culturally distant arrangers are able to form diffused syndicates.

Original language	English
Pages (from-to)	115-124
Journal	Finance Research Letters
Volume	15
DOIs	https://doi.org/10.1016/j.frl.2015.09.001
Publication status	Published - 1 Nov 2015

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10.1016/j.frl.2015.09.001

Cultural Differences and the Structure of Loan Syndicates
© 2015, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 656 KBLicence: CC BY-NC-ND 3.0

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Cultural differences and the structure of loan syndicates

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