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Asymmetric Information and Loan Spreads in Russia: Evidence from Syndicated Loans

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  • Fungacova, Zuzana

    ()
    (BOFIT)

  • Godlewski, Christophe J.

    ()
    (BOFIT)

  • Weill, Laurent

    ()
    (BOFIT)

Abstract

This paper considers whether local bank participation exerts an impact on the spreads for syndicated loans in Russia. Following Berger, Klapper and Udell (2001), we test whether local banks possess a superior ability to deal with information asymmetries. Using a sample of 528 syndicated loans to Russian borrowers, we perform regressions of the spread on a set of variables including information on local bank participation and the characteristics of loans and borrowers. Unlike earlier studies, we distinguish foreign banks with a local presence from those without such presence. The intuition here is that a local presence may influence a foreign bank’s monitoring ability and access to information about borrowers. We observe no significant impact on the spread when there is local bank participation in a syndicated loan, nor do we find any significant influence of the presence of domestic-owned banks or foreign-owned banks on the spread. Additional estimations considering subsamples with exacerbated information asymmetries provide similar results. Therefore our conclusion is that local banks do not benefit from an advantage in monitoring ability and in information in Russia.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2009.

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Length: 30 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:hhs:bofitp:2009_007

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Keywords: bank; information asymmetry; loan; syndication; Russia;

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  1. Hasan, Iftekhar & Marton, Katherin, 2003. "Development and efficiency of the banking sector in a transitional economy: Hungarian experience," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2249-2271, December.
  2. Berger, Allen N. & Klapper, Leora F. & Udell, Gregory F., 2001. "The ability of banks to lend to informationally opaque small businesses," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2127-2167, December.
  3. Laurent Weill, 2003. "Banking efficiency in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 569-592, 09.
  4. Anne-France Delannay & Laurent Weill, 2004. "The Determinants of Trade Credit in Transition Countries," Economic Change and Restructuring, Springer, Springer, vol. 37(3), pages 173-193, 09.
  5. Godlewski, Christophe J. & Weill, Laurent, 2008. "Syndicated loans in emerging markets," Emerging Markets Review, Elsevier, Elsevier, vol. 9(3), pages 206-219, September.
  6. Karas, Alexei & Pyle, William & Schoors, Koen, 2006. "Sophisticated discipline in a nascent deposit market: Evidence from post-communist Russia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 13/2006, Bank of Finland, Institute for Economies in Transition.
  7. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Bank performance, efficiency and ownership in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 31-53, January.
  8. Yener Altunbas & Blaise Gadanecz, 2003. "Developing country economic structure and the pricing of syndicated credits," BIS Working Papers 132, Bank for International Settlements.
  9. Francesca Pissarides & Miroslav Singer & Jan Svejnar, 2000. "Objectives and constraints of entrepreneurs: evidence from small and medium-sized enterprises in Russia and Bulgaria," Working Papers 59, European Bank for Reconstruction and Development, Office of the Chief Economist.
  10. Ivashina, Victoria, 2009. "Asymmetric information effects on loan spreads," Journal of Financial Economics, Elsevier, Elsevier, vol. 92(2), pages 300-319, May.
  11. Weill, Laurent, 2008. "How corruption affects bank lending in Russia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 18/2008, Bank of Finland, Institute for Economies in Transition.
  12. Benjamin C. Esty, 2001. "Structuring Loan Syndicates: A Case Study Of The Hong Kong Disneyland Project Loan," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 80-95.
  13. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
  14. Focarelli, Dario & Pozzolo, Alberto Franco & Casolaro, Luca, 2008. "The pricing effect of certification on syndicated loans," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(2), pages 335-349, March.
  15. Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macro-prudential concerns," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 630-657, September.
  16. Mark Carey & Greg Nini, 2007. "Is the Corporate Loan Market Globally Integrated? A Pricing Puzzle," Journal of Finance, American Finance Association, American Finance Association, vol. 62(6), pages 2969-3007, December.
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Cited by:
  1. Christophe Godlewski & Zuzana Fung�čov� & Laurent Weill, 2011. "Stock Market Reaction to Debt Financing Arrangements in Russia," Comparative Economic Studies, Palgrave Macmillan, vol. 53(4), pages 679-693, December.
  2. Fungachova, Z. & Solanko, L., 2010. "Has Banks’ Financial Intermediation Improved in Russia?," Journal of the New Economic Association, New Economic Association, New Economic Association, issue 8, pages 101-116.

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