Taking the lead: When non-banks arrange syndicated loans

Marcel Grupp

No 100, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: In the mid-1990s, institutional investors entered the syndicated loan market and started to serve borrowers as lead arrangers. Why are non-banks able to compete for this role against banks? How do the composition of syndicates and loan pricing differ among lead arrangers? By using a dataset of 12,847 leveraged loans between 1997 and 2012, I aim to answer these questions. Non-banks benefit from looser regulatory requirements, have industry expertise which helps them in the screening and monitoring of borrowers and focus on firms that ask for loans only instead of additional cross-selling of other services. I can show that non-banks specialize on more opaque and less experienced borrowers, are more likely than banks to choose participants that help to reduce potentially higher information asymmetries and earn 105 basis points more than banks.

Keywords: non-bank lead arrangers; syndicated loans; spread premium (search for similar items in EconPapers)
JEL-codes: G21 G23 G32 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ban and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:100

DOI: 10.2139/ssrn.2602196

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