Abstract
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.
Original language | English |
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Pages (from-to) | 1-22 |
Number of pages | 22 |
Journal | Journal of Financial Economics |
Volume | 104 |
Issue number | 1 |
DOIs | |
Publication status | Published - 1 Apr 2012 |
Bibliographical note
We are grateful for helpful comments and suggestions from Stijn Claessens, Ben Esty, Stuart Gilson, Paul Gompers, Joel Houston, Victoria Ivashina, Christopher James, Simon Johnson, Rafael La Porta, Ross Levine (the referee), Bill Schwert (the editor), Andrei Shleifer, Laura Starks, Jeremy Stein, Belén Villalonga, Yihui Wang, and seminar participants at Zhongnan University of Economics and Law, the American Finance Association Annual Meeting, the Asian Finance Association International Conference, and the China International Conference in Finance. We 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.Keywords
- Excess control rights
- Ownership structure
- Syndicated loans