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External support and bank behaviour in the international syndicated loan market

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  • Blaise Gadanecz
  • Kostas Tsatsaronis
  • Yener Altunbas

Abstract

Banks that enjoyed generous external financial support tended to under-price risk in the international syndicated loan market and did not show signs of innovation in their loan participations. Loans arranged by such banks had on average lower spreads (controlling for risk and other characteristics) and these banks retained loans that were on average priced below market. When supported banks' investment strategy differed materially from that of the average bank it was in holding less specialised portfolios, in aligning more closely with market trends, and in exhibiting lower persistence in their sectoral allocations.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 265.

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Length: 44 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:bis:biswps:265

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Keywords: external support; portfolio choices; risk taking; banks; syndicated loans;

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