Coordination among Lenders in the Syndicated Market

This paper examines how coordination among lead lenders shapes syndicated loan contracts and borrower outcomes. As the number of lead arrangers increases, covenants and collateral become more prevalent, reflecting greater coordination frictions. These effects are significantly weaker when lead lenders have collaborated in the past, indicating that prior relationships foster trust and information sharing. Such relationships also improve borrower performance over the loan tenor. Results are robust to alternative specifications and a 2SLS approach addressing endogeneity in syndicate composition. Overall, our evidence highlights the importance of lender coordination for syndicate design and risk management.

We find that the syndicate structure, in particular, precious lenders' relationships have an impact on syndicated loan contract terms.