What Drives Syndicated Loan Spreads? Moral Hazard and Lending Relationships

2008 ◽  
Author(s):  
Sascha Steffen
Keyword(s):  
Moral Hazard ◽  
Lending Relationships ◽  
Syndicated Loan ◽  
Loan Spreads

Lending relationships, credit ratings and bank loan spreads: evidence from Indonesian listed companies

2020 ◽  
Vol 16 (4) ◽  
pp. 455-479
Author(s):  
Yane Chandera ◽  
Lukas Setia-Atmaja
Keyword(s):  
Fixed Effects ◽  
Credit Ratings ◽  
Listed Companies ◽  
Bank Loan ◽  
Least Squares Regression ◽  
Firm Level ◽  
Content Type ◽  
Lending Relationships ◽  
Loan Spreads ◽  
The Impact

PurposeThis study examines the impact of firm-bank relationships on bank loan spreads and the mitigating role of firm credit ratings on that impact.Design/methodology/approachThe study sample consists of Indonesian publicly listed companies for the period 2006 to 2016; bank-loan data was extracted from the Loan Pricing Corporation Dealscan database. For the degree of firm-bank relationships, the data on each loan is manually computed, using five different methods taken from Bharath et al. (2011) and Fields et al. (2012). All of the regression analyses are controlled for the year fixed effects, heteroscedasticity, and firm-level clustering. To address the endogeneity issues, this study uses several methods, including partitioning the sample, running nearest-neighbour and propensity score matching tests, and using instrumental variables in two-staged least-squares regression models.FindingsIn line with relationship theory and in opposition to the hold-up argument, this study finds that lending relationships reduce bank loan spreads and that the impact is more noticeable among non-rated Indonesian firms. Specifically, each additional unit in the total number of years of a firm-bank relationship and the number of previous loan contracts with the same bank are associated with 7.34 and 9.15 basis-point decreases, respectively, in these loan spreads.Practical implicationsCorporations and banks should maintain close, long-term relationships to reduce the screening and monitoring costs of borrowing. Regulators should create public policies that encourage banks to put more emphasis on relationships in their lending practices, especially in relation to crisis-prone companies.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the impact of lending relationships on bank loan spreads in Indonesia. The study offers insights on banking relationships in emerging markets with concentrated banking industries, underdeveloped capital markets and prominent business-group affiliations.

scholarly journals Syndicated loan spreads and the composition of the syndicate

2014 ◽  
Vol 111 (1) ◽  
pp. 45-69 ◽  
Author(s):  
Jongha Lim ◽  
Bernadette A. Minton ◽  
Michael S. Weisbach
Keyword(s):  
Syndicated Loan ◽  
Loan Spreads

scholarly journals Syndicated Loan Spreads and the Composition of the Syndicate

2012 ◽  
Author(s):  
Jongha Lim ◽  
Bernadette Minton ◽  
Michael Weisbach
Keyword(s):  
Syndicated Loan ◽  
Loan Spreads

scholarly journals Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

2020 ◽  
Vol 12 (18) ◽  
pp. 7639
Author(s):  
Danilo Drago ◽  
Concetta Carnevale
Keyword(s):  
Ordinary Least Squares ◽  
Cost Of Debt ◽  
Empirical Literature ◽  
The European Union ◽  
Listed Firms ◽  
Syndicated Loan Market ◽  
Syndicated Loan ◽  
Loan Spreads ◽  
Corporate Social ◽  
The Relationship

We investigate whether corporate social responsibility (CSR) ratings affect the syndicated loan spreads paid by European listed firms. By performing ordinary least squares (OLS) pooled regressions on a sample of 1101 syndicated loans granted to European companies, we find evidence that borrowers’ CSR ratings have a significant impact on loan spreads. However, the relationship between CSR ratings and loan spreads is quite complex. Low CSR-rated firms pay higher loan spreads than better CSR-rated firms, but high CSR ratings are not always rewarded by lenders. The benefits of a high CSR rating level are significant only for firms located in countries that pay great attention to sustainability issues. Overall, our work provides a key to reconciling the mixed results obtained in the empirical literature, as we find evidence of a significant lack of homogeneity within the European Union countries regarding the relationship between CSR performance and the cost of debt financing.

scholarly journals Syndicated Loan Spreads and the Composition of the Syndicate

2012 ◽  
Author(s):  
Jongha Lim ◽  
Bernadette A. Minton ◽  
Michael S. Weisbach
Keyword(s):  
Syndicated Loan ◽  
Loan Spreads

scholarly journals Forward Guidance and Corporate Lending

2021 ◽  
Author(s):  
Manthos D Delis ◽  
Sizhe Hong ◽  
Nikos Paltalidis ◽  
Dennis Philip
Keyword(s):  
Bank Lending ◽  
Open Market ◽  
Federal Open Market Committee ◽  
Lending Relationships ◽  
Forward Guidance ◽  
Performance Pricing ◽  
Syndicate Structure ◽  
Lending Decisions ◽  
Loan Spreads ◽  
Corporate Loan

Abstract We suggest that forward guidance, via publicly committing the central bank to future actions and creating associated expectations, fundamentally affects bank lending decisions independently of other forms of monetary policy. To test this hypothesis, we build a forward guidance measure based on the language used in the Federal Open Market Committee meetings and match this measure with syndicated loans. Our results show that expansionary forward guidance decreases corporate loan spreads and that this effect is stronger for well-capitalized banks lending to riskier firms. Forward guidance also affects nonprice lending terms, such as covenants, performance pricing provisions, and the loan syndicate structure. Additionally, banks tend to initiate new lending relationships with lower spreads after forward guidance issuance.

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