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Recent Trends in Bank Loan Syndications: Evidence for 1995 to 1999
by Jonathan Jones, William W. Lang, Peter Nigro
Abstract
Bank loan syndications have become an increasingly popular and important
way for commercial borrowers to satisfy their financing needs. The ability
to overcome problems of adverse selection and moral hazard are critical to
the development of this market. Using a panel data set constructed from
the Shared National Credit Program over the period 1995 to 1999, this
paper extends the work of Simons (1993) and Dennis and Mullineaux (2000)
by estimating a multivariate cross-section/time-series regression model
explaining an agent bank's retained share of a syndicated loan. The
panel regression model focuses on the effect of information asymmetries,
loan quality, and capital constraints on an agent bank's retained
loan share. We also test for opportunistic behavior by agent banks.
We find that bank capital, loan seasoning, and maturity have
significant effects on the average loan share retained by an
agent bank. More importantly, we find that, although agent
banks retain larger portions of their lower-quality loans,
certain agent banks specialize in the lower end of the credit
spectrum, and these banks syndicate a larger share of their
low-quality loans.
Disclaimer
As with all OCC Working Papers, the opinions expressed in this paper are those of the author alone, and
do not necessarily reflect the views of the Office of the Comptroller of the Currency or the Department of the Treasury.
Any whole or partial reproduction of material in this paper should include the following citation:
Jonathan Jones, William W. Lang, Peter Nigro " Recent Trends in Bank Loan Syndications:
Evidence for 1995 to 1999," Office of the Comptroller of the Currency, E&PA Working Paper
2000-10, December 2000.
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