The Myth of the Lead Arranger’s Share

Kristian Blickle, Quirin Fleckenstein, Sebastian Hillenbrand and Anthony Saunders

No 922, Staff Reports from Federal Reserve Bank of New York

Abstract: We challenge theories that lead arrangers retain shares of syndicated loans to overcome information asymmetries. Lead arrangers frequently sell their entire loan stake—in over 50 percent of term and 70 percent of institutional loans. These selloffs usually occur days after origination, with lead arrangers retaining no other borrower exposure in 37 percent of selloff cases. Counter to theories, sold loans perform better than retained loans. Our results imply that information asymmetries could be lower than commonly assumed or mitigated by alternative mechanisms such as underwriting risk. We also provide guidance for Dealscan users on how to approximate loan ownership after origination.

Keywords: syndicated lending; loan sales; lead arranger (search for similar items in EconPapers)
JEL-codes: G21 G24 G30 (search for similar items in EconPapers)
Pages: 39
Date: 2020-05-01
New Economics Papers: this item is included in nep-ban
Note: Revised October 2022.
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Citations: View citations in EconPapers (9)

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