Banking market concentration and syndicated loan prices

Biao Mi and Liang Han ()
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Liang Han: University of Reading

Review of Quantitative Finance and Accounting, 2020, vol. 54, issue 1, No 1, 28 pages

Abstract: Abstract This paper investigates the ‘price–concentration’ relationship in pricing syndicated loans. By measuring bank concentration at a state level in US, we show supporting evidence to market power hypothesis that syndicated loan prices are positively associated with the concentration of both borrower’s and lead arranger’s markets but not the concentration of participant lenders’ markets. We also show that loan prices are more sensitively to lead arranger’s market concentration than to borrower’s and a borrower could reduce loan costs by borrowing from a less concentrated bank market. In sharp contrast, loan prices are negatively associated with bank concentration if a loan syndication is led by an investment bank or non-bank financial institution. Our findings are robust to a variety of bank concentration measures and model specification.

Keywords: Banking market; Concentration; Syndicated loan; Market power (search for similar items in EconPapers)
JEL-codes: G20 G21 G23 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11156-018-0781-y

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