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Cultural differences and the structure of loan syndicates

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  • Kleimeier, Stefanie
  • Chaudhry, Sajid M.

Abstract

Do cultural differences between lender and borrower affect the structure of the loan syndicate? Analyzing 8031 syndicated loans to US borrowers signed between 1986 and 2007, we find that lending shares are higher for foreign arrangers than domestic arrangers. Among foreign arrangers, lending shares further increase with cultural distance. We interpret this as a result of an increased moral hazard problem driven by higher information and effort costs faced by foreign arrangers. However, previous interactions between borrowers and arrangers can reduce moral hazard, hence culturally distant arrangers are able to form diffused syndicates.

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  • Kleimeier, Stefanie & Chaudhry, Sajid M., 2015. "Cultural differences and the structure of loan syndicates," Finance Research Letters, Elsevier, vol. 15(C), pages 115-124.
    • Handle: RePEc:eee:finlet:v:15:y:2015:i:c:p:115-124
    DOI: 10.1016/j.frl.2015.09.001
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    3. Alexander Thompson, 2020. "Emerging Powers and Differentiation in Global Climate Institutions," Global Policy, London School of Economics and Political Science, vol. 11(S3), pages 61-72, October.
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    5. Hoffmann, Arvid O.I. & Kleimeier, Stefanie, 2021. "How do banks finance R&D intensive firms? the role of patents in overcoming information asymmetry✰," Finance Research Letters, Elsevier, vol. 38(C).

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    More about this item

    Keywords

    Syndicated loans; Syndicate structure; Culture; Information asymmetry; Moral hazard;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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