Corporate ownership structure and bank loan syndicate structure

Chen LIN, Yue MA, Paul MALATESTA, Yuhai XUAN

Research output: Journal PublicationsJournal Article (refereed)

57 Citations (Scopus)

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 languageEnglish
Pages (from-to)1-22
Number of pages22
JournalJournal of Financial Economics
Volume104
Issue number1
DOIs
Publication statusPublished - 1 Apr 2012

Fingerprint

Syndicates
Ownership structure
Corporate ownership
Bank loans
Borrowing
Owners
Divergence
Lending relationships
Influence factors
Expertise
Cash flow rights
Ownership
Industry
Control rights
Monitoring
Due diligence
Opacity
Large firms
Ownership and control
Loans

Keywords

  • Excess control rights
  • Ownership structure
  • Syndicated loans

Cite this

LIN, Chen ; MA, Yue ; MALATESTA, Paul ; XUAN, Yuhai. / Corporate ownership structure and bank loan syndicate structure. In: Journal of Financial Economics. 2012 ; Vol. 104, No. 1. pp. 1-22.
@article{f881908b6f25478caa807ed6f7ffb6fa,
title = "Corporate ownership structure and bank loan syndicate structure",
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.",
keywords = "Excess control rights, Ownership structure, Syndicated loans",
author = "Chen LIN and Yue MA and Paul MALATESTA and Yuhai XUAN",
year = "2012",
month = "4",
day = "1",
doi = "10.1016/j.jfineco.2011.10.006",
language = "English",
volume = "104",
pages = "1--22",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier",
number = "1",

}

Corporate ownership structure and bank loan syndicate structure. / LIN, Chen; MA, Yue; MALATESTA, Paul; XUAN, Yuhai.

In: Journal of Financial Economics, Vol. 104, No. 1, 01.04.2012, p. 1-22.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Corporate ownership structure and bank loan syndicate structure

AU - LIN, Chen

AU - MA, Yue

AU - MALATESTA, Paul

AU - XUAN, Yuhai

PY - 2012/4/1

Y1 - 2012/4/1

N2 - 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.

AB - 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.

KW - Excess control rights

KW - Ownership structure

KW - Syndicated loans

UR - http://commons.ln.edu.hk/sw_master/6559

U2 - 10.1016/j.jfineco.2011.10.006

DO - 10.1016/j.jfineco.2011.10.006

M3 - Journal Article (refereed)

VL - 104

SP - 1

EP - 22

JO - Journal of Financial Economics

JF - Journal of Financial Economics

SN - 0304-405X

IS - 1

ER -