Corporate ownership structure and bank loan syndicate structure
Journal of Financial Economics
Excess control rights, Ownership structure, Syndicated loans
Using a novel data set on corporate ownership and control, we show that the divergence between the control rights and cash-flow rights of a borrowing firm's largest ultimate owner has a significant impact on the concentration and composition of the firm's loan syndicate. When the control-ownership divergence is large, lead arrangers form syndicates with structures that facilitate enhanced due diligence and monitoring efforts. These syndicates tend to be relatively concentrated and composed of domestic banks that are geographically close to the borrowing firms and that have lending expertise related to the industries of the borrowers. We also examine factors that influence the relation between ownership structure and syndicate structure, including lead arranger reputation, prior lending relationship, borrowing firm informational opacity, presence of multiple large owners, laws and institutions, and financial crises.
Authors thank Arbitor Ma, Pennie Wong, and William Alden for help with data collection. Lin and Xuan gratefully acknowledge financial support from Chinese University of Hong Kong and the Division of Research of the Harvard Business School, respectively.
Copyright © 2011 Elsevier B.V. Access to external full text or publisher's version may require subscription.
Lin, C., Ma. Y., Malatesta, P., & Xuan, Y. (2012). Corporate ownership structure and bank loan syndicate structure. Journal of Financial Economics, 104(1), 1-22. doi: 10.1016/j.jfineco.2011.10.006