Competition or Collaboration? The Reciprocity Effect in Loan Syndication

Cai, Jian

doi:10.2139/ssrn.1362454

Cited by 8 publications

(9 citation statements)

References 34 publications

(36 reference statements)

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“…9,10,11 We then compute the distance between two banks by quantifying the similarity of their loan portfolios. The detailed construction of our distance measures is as follows.…”

Section: Distance Between Two Lendersmentioning

confidence: 99%

“…1 2 Loan amount is split equally over all lead arrangers for loans with multiple leads. 1 3 According to Cai (2009), banks commonly rotate their roles as lead arrangers and participant lenders in loan syndicates. Such reciprocal arrangements make it feasible to analyze the interrelationships among the top 100 lead arrangers since they are also heavily involved in loan participation.…”

Section: Distance Between Two Lendersmentioning

confidence: 99%

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Syndication, interconnectedness, and systemic risk

Cai

Eidam

Saunders

et al. 2018

Journal of Financial Stability

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202

112

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This paper studies the interconnectedness of banks in the syndicated loan market as a major source of systemic risk. We develop a set of novel measures to describe the "distance" (similarity) between two banks'syndicated loan portfolios and …nd that such distance explains how banks are interconnected in this market. As lead arrangers choose to work with those that have a similar focus in terms of lending expertise, there is a high propensity of bank lenders to concentrate syndicate partners rather than to diversify them. We …nd some evidence of potential bene…ts of this behavior as to lower costs of screening and monitoring, for example, higher shares of the loan taken by more connected lenders and lower loan spreads if syndicated lenders are more connected.Lastly, we …nd that the most heavily interconnected lenders in the syndicated loan market are also the greatest contributors to systemic risk, suggesting important negative externalities associated with the syndication process.

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“…9,10,11 We then compute the distance between two banks by quantifying the similarity of their loan portfolios. The detailed construction of our distance measures is as follows.…”

Section: Distance Between Two Lendersmentioning

confidence: 99%

Section: Distance Between Two Lendersmentioning

confidence: 99%

Syndication, interconnectedness, and systemic risk

Cai

Eidam

Saunders

et al. 2018

Journal of Financial Stability

Self Cite

202

112

View full text Add to dashboard Cite

show abstract

“…One mechanism which helps reduce information and agency problems within a syndicate is trust based on joint investments in the past (e.g., Pichler and Wilhelm 2001, Gopalan et al 2008and Cai 2009 for empirical studies; Chemmanur andTian 2009 or Tykvová 2007 for theoretical models). If both VCs recently experienced a successful cooperation within a syndicate, they will know each other, trust each other and will be willing to cooperate again.…”

Section: Participation In Cross-border Dealsmentioning

confidence: 99%

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Tykvová¹,

Schertler²

2011

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp11022.pdf Non-Technical SummaryIn the last decade, more than one third of worldwide venture capital investments have been crossborder deals. with an inexperienced local venture capitalist may be a successful way for inexperienced foreign venture capitalists to overcome the obstacles of geographical and institutional distances. This result of our analysis is of particular relevance for venture capitalists with small experience who want to expand their activities beyond their countries' borders but who do not (yet) have direct access to deals in foreign countries. These investors may start their international expansion via syndication with inexperienced local venture capitalists in small deals. In the course of time, as they become more and more experienced and possess better contacts to other venture capitalists through repeated interactions, they may not only gain access to cross-border deals on their own but they may also be able to invest in larger deals and to join cross-border syndicates led by more experienced venture capitalists. Drawing on a novel dataset of worldwide venture capital deals, we investigate how venture capitalists (VCs) overcome the complexity of investing in geographically and institutionally distant regions. Our results indicate that syndicating with local VCs is a common way for foreign VCs to gain deal access, overcome the complexity of investing in distant regions and offset their lack of within-country experience. The foreign VC's distance from the portfolio company ceases to be a serious investment obstacle when he can rely on a highly experienced local VC. Our results further suggest that inexperienced VCs, i.e. those VCs with a large need for syndication, increase their chances to invest across borders when they invest in small deals jointly with local inexperienced partners. Das Wichtigste in Kürze

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“…The majority of banks participate as lead arrangers and usually alternate roles in subsequent loans (Cai, 2010). However, there are a number of banks that never participate as lead arrangers.…”

Section: Loan Datamentioning

confidence: 99%

Banking Crises and Financial Integration

Caballero

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Copyright ©Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. This paper explores whether the level of financial integration of banks in a country increases the incidence of systemic banking crises. The paper uses a de facto proxy for financial integration based on network statistics of banks participating in the global market of interbank syndicated loans. Specifically, the network statistics degree and betweenness are used to proxy for the de facto integration of the average bank in a country. The paper fits a count data model in the cross-section for the period 1980-2007 and finds that the level of integration of the average bank is a robust determinant of the incidence of banking crises. An increased level of de facto integration as measured by borrowing by banks is positively associated with the incidence of crises. A higher level of de jure integration (capital account openness) is also associated with a higher incidence of crises. However, the results also indicate that prudential banking regulation (supervision) plays a crucial and much larger role in reducing the incidence of crises. Interestingly, the results also show that the level of integration as measured by betweenness of the average bank has a negative effect on the incidence of crises. That is, the more important the average bank of a country is to the global bank network, the fewer the number of crises the country endures. Cataloging-in-PublicationJEL Classification: E44, E51, F21, F32, F34, G01

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Competition or Collaboration? The Reciprocity Effect in Loan Syndication

Cited by 8 publications

References 34 publications

Syndication, interconnectedness, and systemic risk

Syndication, interconnectedness, and systemic risk

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Banking Crises and Financial Integration

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