Investor Diversity and Liquidity in The Secondary Loan Market

Joao Santos and Pei Shao ()
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Pei Shao: University of Lethbridge

Journal of Financial Services Research, 2023, vol. 63, issue 3, No 1, 249-272

Abstract: Abstract We find strong evidence that investor diversity is beneficial to loan liquidity: More diverse syndicates, as measured by the number of investor-types or the concentration of loan shares by investor-type, hold loans that have lower quoted bid-ask spreads in the secondary market. These results are robust, and do not appear to be driven by investors’ borrower/loan selection. Further, they are not driven by the presence of any particular type of investors. Our findings are consistent with Goldstein and Yang (J Financ 70:1723–1765 2015) insight that there is a strategic complementarity between different groups in trading on their information and producing information.

Keywords: Loan syndicate; Investor diversity; Loan market liquidity; Loan bid-ask spreads; Informed investors (search for similar items in EconPapers)
JEL-codes: G14 G21 G22 G23 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Investor Diversity and Liquidity in the Secondary Loan Market (2017)
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DOI: 10.1007/s10693-022-00377-0

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