Post by Sapphire Capital on Jul 11, 2008 22:19:35 GMT 4
Liquidity Risk and Syndicate Structure
EVAN GATEV
Boston College - Department of Finance
PHILIP E. STRAHAN
Boston College - Department of Finance; National Bureau of Economic Research (NBER)
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January 31, 2008
Abstract:
We offer a new explanation of loan syndicate structure based on banks' comparative advantage in managing systematic liquidity risk. When a syndicated loan to a rated borrower has systematic liquidity risk, the fraction of passive participant lenders that are banks is about 8% higher than for loans without liquidity risk. In contrast, liquidity risk does not explain the share of banks as lead lenders. Using a new measure of ex-ante liquidity risk exposure, we find further evidence that syndicate participants specialize in liquidity-risk management while lead banks manage the lending relationships. Links from transactions deposits to liquidity exposure are about 50% larger at participant banks than at lead arrangers.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1103234_code141616.pdf?abstractid=1103234&mirid=3
EVAN GATEV
Boston College - Department of Finance
PHILIP E. STRAHAN
Boston College - Department of Finance; National Bureau of Economic Research (NBER)
--------------------------------------------------------------------------------
January 31, 2008
Abstract:
We offer a new explanation of loan syndicate structure based on banks' comparative advantage in managing systematic liquidity risk. When a syndicated loan to a rated borrower has systematic liquidity risk, the fraction of passive participant lenders that are banks is about 8% higher than for loans without liquidity risk. In contrast, liquidity risk does not explain the share of banks as lead lenders. Using a new measure of ex-ante liquidity risk exposure, we find further evidence that syndicate participants specialize in liquidity-risk management while lead banks manage the lending relationships. Links from transactions deposits to liquidity exposure are about 50% larger at participant banks than at lead arrangers.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1103234_code141616.pdf?abstractid=1103234&mirid=3