The effect of banks’ financial reporting on syndicated-loan structures

Anne Beatty, S. Liao, Haiwen (Helen) Zhang

Research output: Contribution to journalArticle

Abstract

We explore how an accounting measure of information asymmetry between lead and participating lenders influences syndication structures by examining whether lead lenders’ commercial and industrial (C&I) loan-loss provision validity affects the fraction of loans they retain. We first conduct multiple tests showing that C&I provision validity reflects banks’ underlying screening and monitoring effectiveness. We then find lead lenders’ loan share decreases with C&I provision validity, but not with non-C&I provision validity. Consistent with an information effect, we further find this association is attenuated by (i) alternative information sources about the borrowers and (ii) previous lead/participant relationships and participant/borrower relationships.

Original languageEnglish (US)
Pages (from-to)496-520
Number of pages25
JournalJournal of Accounting and Economics
Volume67
Issue number2-3
DOIs
StatePublished - Apr 1 2019

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