Determinants of bank loan syndication structures for emerging market borrowers

Abstract

This paper investigates loan, borrower and country-level characteristics that influence bank loan syndicate structures lending to borrowers from emerging countries. It finds that main syndication motives such as loans portfolio diversification, regulatory pressure and management costs affect the structure of syndicates in a manner which is consistent with the benefits of syndication. Syndicates also adapt their structure to the banking environment of the borrower country and to mitigate potential agency problems stemming from the syndication process. Banking structure, regulation and financial development are the main drivers of the structuring of syndicates lending to borrowers from emerging markets. Structure is also sensitive to the legal environment in order to mitigate agency problems and re-contracting risk in case of borrower distress.