Cultural differences and the structure of loan syndicates

Stefanie Kleimeier and Sajid M. Chaudhry

Finance Research Letters, 2015, vol. 15, issue C, 115-124

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.

Keywords: Syndicated loans; Syndicate structure; Culture; Information asymmetry; Moral hazard (search for similar items in EconPapers)
JEL-codes: D82 F30 G15 G21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:15:y:2015:i:c:p:115-124

DOI: 10.1016/j.frl.2015.09.001

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