Lead arranger reputation and the structure of loan syndicates

Sajid M. Chaudhry; Stefanie Kleimeier

doi:10.1016/j.intfin.2015.05.021

Lead arranger reputation and the structure of loan syndicates

Sajid M. Chaudhry
, Stefanie Kleimeier

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Abstract

This study explores the effects of information asymmetry and arranger reputations on syndicated loan structures. The moral hazard problem arising from information asymmetries between borrower and syndicate can be overcome only by the most reputable arrangers. Both moral hazard and adverse selection problems appear when arrangers have an information advantage over other syndicate participants. However, the adverse selection problem arises only when low-reputation arrangers lend to opaque borrowers.

Original language	English
Pages (from-to)	116-126
Journal	Journal of International Financial Markets, Institutions and Money
Volume	38
DOIs	https://doi.org/10.1016/j.intfin.2015.05.021
Publication status	Published - 1 Sept 2015

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10.1016/j.intfin.2015.05.021

Lead arranger reputation 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, 273 KBLicence: CC BY-NC-ND 3.0

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AB - This study explores the effects of information asymmetry and arranger reputations on syndicated loan structures. The moral hazard problem arising from information asymmetries between borrower and syndicate can be overcome only by the most reputable arrangers. Both moral hazard and adverse selection problems appear when arrangers have an information advantage over other syndicate participants. However, the adverse selection problem arises only when low-reputation arrangers lend to opaque borrowers.

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Lead arranger reputation and the structure of loan syndicates

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