Liquidity Risk and Syndicate Structure

Evan Gatev and Philip Strahan

No 13802, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We offer a new explanation of loan syndicate structure based on banks' comparative advantage in managing systematic liquidity risk. When a syndicated loan to a rated borrower has systematic liquidity risk, the fraction of passive participant lenders that are banks is about 8% higher than for loans without liquidity risk. In contrast, liquidity risk does not explain the share of banks as lead lenders. Using a new measure of ex-ante liquidity risk exposure, we find further evidence that syndicate participants specialize in liquidity-risk management while lead banks manage lending relationships. Links from transactions deposits to liquidity exposure are about 50% larger at participant banks than at lead arrangers.

JEL-codes: G2 G32 (search for similar items in EconPapers)
Date: 2008-02
New Economics Papers: this item is included in nep-ban, nep-fmk and nep-rmg
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Gatev, Evan & Strahan, Philip E., 2009. "Liquidity risk and syndicate structure," Journal of Financial Economics, Elsevier, vol. 93(3), pages 490-504, September.

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