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Working Paper
Is the corporate loan market globally integrated? a pricing puzzle
We offer evidence that interest rate spreads on syndicated loans to corporate borrowers are economically significantly smaller in Europe than in the U.S., other things equal. Differences in borrower, loan and lender characteristics associated with equilibrium mechanisms suggested in the literature do not appear to explain the phenomenon. Borrowers overwhelmingly issue in their natural home market and bank portfolios display significant home "bias." This may explain why pricing discrepancies are not competed away, but the fundamental causes of the discrepancies remain a puzzle. Thus, ...
Working Paper
Concentration of Control Rights in Leveraged Loan Syndicates
We ?nd that corporate loan contracts frequently concentrate control rights with a subset of lenders. Despite the rise in term loans without ?nancial covenants?so-called covenant-lite loans?borrowing ?rms? revolving lines of credit almost always retain traditional ?nancial covenants. This split structure gives revolving lenders the exclusive right and ability to monitor and to renegotiate the ?nancial covenants, and we con?rm that loans with split control rights are still subject to the discipline of ?nancial covenants. We provide evidence that split control rights are designed to mitigate ...
Working Paper
Concentration of Control Rights in Leveraged Loan Syndicates
Corporate loan contracts frequently concentrate control rights with a subset of lenders. In a large fraction of leveraged loans, which typically include a revolving line of credit and a term loan, the revolving lenders have the exclusive right and ability to monitor and renegotiate the financial covenants in the governing credit agreements. Concentration is more common in loans that include nonbank institutional lenders and in loans originated subsequent to the financial crisis, when recognition of bargaining frictions increased. We conclude that concentrated control rights maintain the ...
Working Paper
Accounting standards and information: inferences from cross-listed financial firms
Publicly traded financial firms within the European Union will be required to adhere to International Accounting Standards (IAS) in their financial reporting beginning in 2005, which can entail a higher degree of financial disclosure than was previously mandated under national accounting standards. A number of European financial firms had previously subjected themselves to additional disclosure by listing their stock on U.S. exchanges, which obligates them to reconcile their financial accounts to U.S. GAAP (Generally Accepted Accounting Principles). Among national accounting systems, U.S. ...
Working Paper
The value of financial intermediaries: empirical evidence from syndicated loans to emerging market borrowers
Empirical estimates of the benefit of financial intermediation are constructed by examining the role played by local banks in facilitating syndicated loans to borrowers in emerging market countries. Assuming that local banks possess a superior monitoring ability, the market is ideal for studying the value of intermediation since cross-border lending into emerging markets is plagued by particularly high information and agency costs and the supply of local bank capital is in limited short run supply. Using variation in the propensity of local banks to participate in foreign arranged syndicates, ...