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Liquidity Risk and Syndicate Structure

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Author Info
Evan Gatev
Philip Strahan
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 lending relationships. Links from transactions deposits to liquidity exposure are about 50% larger at participant banks than at lead arrangers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13802.

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Date of creation: Feb 2008
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Handle: RePEc:nbr:nberwo:13802

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G2 - Financial Economics - - Financial Institutions and Services
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Godlewski, Christophe, 2008. "Duration of loan arrangement and syndicate organization," MPRA Paper 10953, University Library of Munich, Germany. [Downloadable!]
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