Conferece by Dr. Janko Hernández Cortés (ITAM)

Abstract:
“In this paper we compare the spreads of single lender loans with multiple lenders in syndicated loans of similar characteristics. There are two countervailing effects at work. A risk sharing effect, which points to a negative relationship between the number of lenders and the loan spreads. A collusive effect, which suggests a positive connection given that borrowers have less opportunities outside the syndicate when lenders in the syndicate collude among themselves. We use data on large corporate loans in the US market for the period 1990-2013 to provide evidence that, for comparable size, the second effect is more important than the first one once we control for borrower characteristics and potential selection biases. There is also evidence that as the deal amount increases the differential effect on spreads between syndicated and non-syndicated loans is reduced. Finally, the analysis shows two additional results. First, the differential in the spreads between syndicated and non-syndicated loans is reduced in recessions. Second, there is a non-lineal relationship between the number of members and leaders in the syndicate and the spreads.”