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Asymmetric Information and Loan Spreads in Russia

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  • Zuzana FungáÄová
  • Christophe J. Godlewski
  • Laurent Weill

Abstract

This paper considers whether local bank participation exerts an impact on the spread for syndicated loans in Russia. Following Berger et al. (2001), we test whether local banks possess 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, ours distinguishes 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 domestically 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 accessing information in Russia.

Suggested Citation

  • Zuzana FungáÄová & Christophe J. Godlewski & Laurent Weill, 2011. "Asymmetric Information and Loan Spreads in Russia," Eastern European Economics, Taylor & Francis Journals, vol. 49(1), pages 13-29, January.
  • Handle: RePEc:mes:eaeuec:v:49:y:2011:i:1:p:13-29
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    Cited by:

    1. Pessarossi, Pierre & Godlewski, Christophe J. & Weill, Laurent, 2010. "Foreign bank lending and information asymmetries in China," BOFIT Discussion Papers 20/2010, Bank of Finland, Institute for Economies in Transition.
    2. Godlewski, Christophe J., 2014. "Bank loans and borrower value during the global financial crisis: Empirical evidence from France," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 100-130.
    3. Christophe Godlewski, 2012. "Are bank loans still “special” (especially during a crisis)? Empirical evidence from a European country," Working Papers of LaRGE Research Center 2012-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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