The strategic behavior of banks during a financial crisis; evidence from the syndicated loan market

Ralph De Haas and Neeltje Van Horen ()

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the strategic reaction of banks to the current global financial crisis. In particular, we test whether banks predominantly react by diversifying their loan portfolio or by stepping up their screening and monitoring. To this end we analyze information on nearly 17,000 syndicated loans that were granted to private borrowers in 60 countries over the period 2005-2008. We exploit the variation in lender and borrower characteristics to examine whether banks’ risk-mitigating strategies differ across borrower types. Our results show that during a financial crisis arranging banks retain larger portions of loans and form more concentrated syndicates, reflecting an increased need to screen and monitor borrowers. During a crisis, agency problems are attenuated in syndicates that lend to repeat borrowers and that are composed by experienced arrangers.

Keywords: bank lending; financial crisis; asymmetric information; syndication (search for similar items in EconPapers)
JEL-codes: D82 G15 G21 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-ban and nep-cta
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/15015/1/MPRA_paper_15015.pdf revised version (application/pdf)
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https://mpra.ub.uni-muenchen.de/17981/1/MPRA_paper_17981.pdf revised version (application/pdf)

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