Taking the lead: When non-banks arrange syndicated loans

Arbeitspapier

In the mid-1990s, institutional investors entered the syndicated loan market and started to serve borrowers as lead arrangers. Why are non-banks able to compete for this role against banks? How do the composition of syndicates and loan pricing differ among lead arrangers? By using a dataset of 12,847 leveraged loans between 1997 and 2012, I aim to answer these questions. Non-banks benefit from looser regulatory requirements, have industry expertise which helps them in the screening and monitoring of borrowers and focus on firms that ask for loans only instead of additional cross-selling of other services. I can show that non-banks specialize on more opaque and less experienced borrowers, are more likely than banks to choose participants that help to reduce potentially higher information asymmetries and earn 105 basis points more than banks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 100

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: non-bank lead arrangers ; syndicated loans ; spread premium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grupp, Marcel
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2015

Further information

• DOI: doi:10.2139/ssrn.2602196
• Handle: http://hdl.handle.net/10419/110186
• Last update: 10.03.2025, 11:41 AM CET