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Does Poor Performance Damage the Reputation of Financial Intermediaries? Evidence from the Loan Syndication Market

We investigate the effect of poor performance on financial intermediary reputation by estimating the effect of large-scale bankruptcies among a lead arranger's borrowers on its subsequent syndication activity. Consistent with reputation damage, such lead arrangers retain larger fractions of the...

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Published in:	The Journal of finance (New York) 2011-12, Vol.66 (6), p.2083-2120
Main Authors:	GOPALAN, RADHAKRISHNAN, NANDA, VIKRAM, YERRAMILLI, VIJAY
Format:	Article
Language:	English
Subjects:	Bank loans Bankruptcy Borrowing Broadcast syndication Chapter 11 bankruptcy Financial intermediaries Financial services Financial services industries Lenders Loans Participating loans Portfolio management Reputations Studies Syndicates
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description	We investigate the effect of poor performance on financial intermediary reputation by estimating the effect of large-scale bankruptcies among a lead arranger's borrowers on its subsequent syndication activity. Consistent with reputation damage, such lead arrangers retain larger fractions of the loans they syndicate, are less likely to syndicate loans, and are less likely to attract participant lenders. The consequences are more severe when borrower bankruptcies suggest inadequate screening or monitoring by the lead arranger. However, the effect of borrower bankruptcies on syndication activity is not present among dominant lead arrangers, and is weak in years in which many lead arrangers experience borrower bankruptcies.
doi_str_mv	10.1111/j.1540-6261.2011.01692.x
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source	International Bibliography of the Social Sciences (IBSS); Wiley-Blackwell Read & Publish Collection; JSTOR
subjects	Bank loans Bankruptcy Borrowing Broadcast syndication Chapter 11 bankruptcy Financial intermediaries Financial services Financial services industries Lenders Loans Participating loans Portfolio management Reputations Studies Syndicates
title	Does Poor Performance Damage the Reputation of Financial Intermediaries? Evidence from the Loan Syndication Market
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