Who lends to riskier and lower-profitability firms? Evidence from the syndicated loan market

Maria Iosifidi and Sotirios Kokas

MPRA Paper from University Library of Munich, Germany

Abstract: This paper exploits a unique data set on bank-firm relationships based on syndicated loan deals to examine the effect of banks’ credit risk and capital on firms’ risk and performance. Our data set is a multilevel cross-section, which essentially allows controlling for all bank and firm characteristics through respective fixed effects, thus avoiding concerns regarding omitted variables. We find that banks with higher credit risk are associated with more risky firms, with lower profitability and market value. In turn, we find that banks with higher risk-weighted capital ratios lend to riskier firms with less market value. Our results are indicative of a strong adverse selection mechanism and highlight the need to monitor the risky banks more closely, especially as we consider large and influential syndicated loan deals.

Keywords: Bank-firm relationships; Risk; Performance; Syndicated loans (search for similar items in EconPapers)
JEL-codes: G20 G21 G30 G32 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-eff and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/61942/1/MPRA_paper_61942.pdf original version (application/pdf)

Related works:
Journal Article: Who lends to riskier and lower-profitability firms? Evidence from the syndicated loan market (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:61942

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().