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Are syndicated loans truly less expensive?

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  • Cortés, Janko Hernández
  • Tribó, Josep A
  • Adamuz, María de las Mercedes

Abstract

In this paper, we empirically examine the spreads of syndicated and non-syndicated loans. We compare the spreads from tranches belonging to both types of contracts across deals of similar sizes. Our study of large corporate loans in the US market for the period from 1990 to 2013 shows that the differential between syndicated and non-syndicated spreads is, on average, 19.23 basis points. Moreover, for small and medium loans, the differences are 39.3 and 21.89 basis points, respectively. We use different methodologies and time periods and address endogeneity concerns on the decision of syndication to provide robust empirical evidence that, contrary to some previous studies, syndicated loans are not less expensive than non-syndicated loans and in most cases are significantly more expensive, particularly for small loans.

Suggested Citation

  • Cortés, Janko Hernández & Tribó, Josep A & Adamuz, María de las Mercedes, 2020. "Are syndicated loans truly less expensive?," Journal of Banking & Finance, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jbfina:v:120:y:2020:i:c:s0378426620302041
    DOI: 10.1016/j.jbankfin.2020.105942
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    More about this item

    Keywords

    Syndicated loans; Loan spreads;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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