Lending Diversification and Interconnectedness of the Syndicated Loan Market

We investigate the effects of syndicated loan network centrality on bank performance. Syndicated loan network centrality measures the similarity and influence of the other banks within a given banks network. The network centrality constructed by syndicated loans can allow banks to gather and transfer valuable information and can thus facilitate profit-making acquisition in loan investment decisions. We use a planar maximally filtered graph to construct an interbank network using syndicated loan portfolios at the industry level. We show that the syndicated loan portfolios of high-centrality banks exhibit a higher level of portfolio diversification than those of low-centrality banks. We also document that our composite centrality measure of the bank network showed statistical significance in terms of bank performance even after controlling for the financial variables of market size, loan allocation, total asset, and loan diversification. Our findings suggest that the performance of a bank in a syndicated loan hierarchy is related to its position in this hierarchy.

Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

We investigate whether corporate social responsibility (CSR) ratings affect the syndicated loan spreads paid by European listed firms. By performing ordinary least squares (OLS) pooled regressions on a sample of 1101 syndicated loans granted to European companies, we find evidence that borrowers’ CSR ratings have a significant impact on loan spreads. However, the relationship between CSR ratings and loan spreads is quite complex. Low CSR-rated firms pay higher loan spreads than better CSR-rated firms, but high CSR ratings are not always rewarded by lenders. The benefits of a high CSR rating level are significant only for firms located in countries that pay great attention to sustainability issues. Overall, our work provides a key to reconciling the mixed results obtained in the empirical literature, as we find evidence of a significant lack of homogeneity within the European Union countries regarding the relationship between CSR performance and the cost of debt financing.