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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/204

Title: The Pricing effect of certification on bank loans: evidence from the syndicated credit market
Authors: Casolaro, Luca
Focarelli, Dario
Pozzolo, Alberto Franco
Keywords: bank lending
syndicated loans
certification
Issue Date: Jan-2004
Publisher: CEIS
Series/Report no.: Quaderni CEIS
Abstract: This paper provides a direct test of banks’ ability to mitigate informational asymmetries. In syndicated loans, lenders’ incentive to screen borrowers ex ante and to monitor them ex post increases with the share they retain; consequently, the higher this share, the less risky the loan should be considered by investors, and the lower should be the interest rate they require. We analyze a large sample of syndicated loans arranged in over 80 countries during the nineties. We find that interest rates decrease in the share of the facility retained by the arranger. This certification effect is greater for smaller, more opaque loans where screening and monitoring are more valuable.
URI: http://hdl.handle.net/2108/204
Appears in Collections:Quaderni

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