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Building reputation on the syndicated lending market: A participant bank perspective

Listed author(s):
  • Marie-Hélène Broihanne

    ()

    (LaRGE Research Center, Université de Strasbourg)

  • Christophe Godlewski

    ()

    (LaRGE Research Center, Université de Strasbourg)

Reputation of financial institutions is crucial for their activity and performance. Participant banks often rely on lead bank’s reputation in making future syndicated loan participation and lending decisions. We apply ordered probit regression techniques to a sample of more than 4,600 loans to investigate the determinants of participant banks reputation on the European syndicated lending market between 1999 and 2009. We find that the prestige of the lead bank in the first syndicate joined by a participant is crucial for his reputation. With a top 3 leader, participant reputation may increase by 85% while this effect drops to 30% when syndicating with a top 20 arranger. Establishing participant-lead bank relationships, developing a particular expertise in loan purpose or borrower industry, and funding very large deals also contributes to participant reputation. On the contrary, joining small club deals can be detrimental for reputation building.

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File URL: http://ifs.u-strasbg.fr/large/publications/2014/2014-02.pdf
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Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2014-02.

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Date of creation: 2014
Handle: RePEc:lar:wpaper:2014-02
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