1. Overview Motivations Literature Empirical design Results Summary & Perspectives
The Design of Bank Loan Syndicates
in Emerging Markets
Christophe J. Godlewski
Faculty of Business and Economics, University of Strasbourg
EMG Conference 2008 - Emerging Markets Finance
Cass Business School, London
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 1/ 19

2. Overview Motivations Literature Empirical design Results Summary & Perspectives
Outline
1 Overview
2 Motivations
3 Literature
4 Empirical design
5 Results
6 Summary & Perspectives
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 2/ 19

3. Overview Motivations Literature Empirical design Results Summary & Perspectives
The volume of syndicated loans in emerging markets has
grown from 91.8 billion USD in 1995 to 379.8 billion USD in
2005
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 3/ 19

4. Overview Motivations Literature Empirical design Results Summary & Perspectives
The volume of syndicated loans in emerging markets has
grown from 91.8 billion USD in 1995 to 379.8 billion USD in
2005
Important source of external finance in emerging markets: e.g.
more than 11%, 23%, and 36% of the private credit of financial
institutions in Singapore, Mexico and Russia respectively (2005)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 3/ 19

5. Overview Motivations Literature Empirical design Results Summary & Perspectives
The volume of syndicated loans in emerging markets has
grown from 91.8 billion USD in 1995 to 379.8 billion USD in
2005
Important source of external finance in emerging markets: e.g.
more than 11%, 23%, and 36% of the private credit of financial
institutions in Singapore, Mexico and Russia respectively (2005)
Benefits of syndicated loans for banks and borrowers
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 3/ 19

6. Overview Motivations Literature Empirical design Results Summary & Perspectives
The volume of syndicated loans in emerging markets has
grown from 91.8 billion USD in 1995 to 379.8 billion USD in
2005
Important source of external finance in emerging markets: e.g.
more than 11%, 23%, and 36% of the private credit of financial
institutions in Singapore, Mexico and Russia respectively (2005)
Benefits of syndicated loans for banks and borrowers
Enhances the sources of external finance / Reduces cost of borrowed
funds ⇒ favors investment in emerging countries ⇒ important for
economic development in emerging markets
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 3/ 19

7. Overview Motivations Literature Empirical design Results Summary & Perspectives
The volume of syndicated loans in emerging markets has
grown from 91.8 billion USD in 1995 to 379.8 billion USD in
2005
Important source of external finance in emerging markets: e.g.
more than 11%, 23%, and 36% of the private credit of financial
institutions in Singapore, Mexico and Russia respectively (2005)
Benefits of syndicated loans for banks and borrowers
Enhances the sources of external finance / Reduces cost of borrowed
funds ⇒ favors investment in emerging countries ⇒ important for
economic development in emerging markets
May contribute to financial stability ⇒ fundamental issue for
emerging economies
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 3/ 19

8. Overview Motivations Literature Empirical design Results Summary & Perspectives
Syndicated loan = provided by two or more banks and governed by
a single loan agreement
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 4/ 19

9. Overview Motivations Literature Empirical design Results Summary & Perspectives
Syndicated loan = provided by two or more banks and governed by
a single loan agreement
Senior banks (arrangers) are usually appointed by the borrower to
bring together the syndicate of banks and retain a portion of the
loan and look for junior members - the participants
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 4/ 19

10. Overview Motivations Literature Empirical design Results Summary & Perspectives
Syndicated loan = provided by two or more banks and governed by
a single loan agreement
Senior banks (arrangers) are usually appointed by the borrower to
bring together the syndicate of banks and retain a portion of the
loan and look for junior members - the participants
Motivations for lenders: diversification of loan portfolios /
avoiding excessive single-name exposure (regulatory compliance) /
fee income for the lead bank
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 4/ 19

11. Overview Motivations Literature Empirical design Results Summary & Perspectives
Syndicated loan = provided by two or more banks and governed by
a single loan agreement
Senior banks (arrangers) are usually appointed by the borrower to
bring together the syndicate of banks and retain a portion of the
loan and look for junior members - the participants
Motivations for lenders: diversification of loan portfolios /
avoiding excessive single-name exposure (regulatory compliance) /
fee income for the lead bank
Motivations for borrowers: more competitive pricing and more
flexible funding structure, restriction of negotiation with one bank,
and potential bilateral relationships with other syndicate members
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 4/ 19

12. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

13. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

14. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Moral hazard problem (arranger’s unobservable monitoring effort)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

15. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Moral hazard problem (arranger’s unobservable monitoring effort)
Borrower’s financial distress more complicated ⇒ lenders must reach
a collective decision
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

16. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Moral hazard problem (arranger’s unobservable monitoring effort)
Borrower’s financial distress more complicated ⇒ lenders must reach
a collective decision
Syndicate design / structure ⇔ mitigate agency costs (Pichler
and Wilhelm, 2001)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

17. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Moral hazard problem (arranger’s unobservable monitoring effort)
Borrower’s financial distress more complicated ⇒ lenders must reach
a collective decision
Syndicate design / structure ⇔ mitigate agency costs (Pichler
and Wilhelm, 2001)
Arranger influences design / structure of the syndicate (monitoring
efforts of participants)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

18. Overview Motivations Literature Empirical design Results Summary & Perspectives
Potential agency problems
Adverse selection problem (arranger’s private information) ⇒
syndication of loans with the less favorable information
Moral hazard problem (arranger’s unobservable monitoring effort)
Borrower’s financial distress more complicated ⇒ lenders must reach
a collective decision
Syndicate design / structure ⇔ mitigate agency costs (Pichler
and Wilhelm, 2001)
Arranger influences design / structure of the syndicate (monitoring
efforts of participants)
Who is invited / how much to fund / how much revenues
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 5/ 19

19. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

20. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Small syndicates ⇒ minimize management costs / prevent
free-riding / avoid hold-up problems / resolving borrower’s distress
more efficiently
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

21. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Small syndicates ⇒ minimize management costs / prevent
free-riding / avoid hold-up problems / resolving borrower’s distress
more efficiently
Large syndicates ⇒ exploit scale economies / develop reputation
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

22. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Small syndicates ⇒ minimize management costs / prevent
free-riding / avoid hold-up problems / resolving borrower’s distress
more efficiently
Large syndicates ⇒ exploit scale economies / develop reputation
Syndicated loans in EME vs DE: higher spreads (172 bp vs 160) /
lower maturities (55 vs 81 months) / larger arranger’s share (14% vs
11%)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

23. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Small syndicates ⇒ minimize management costs / prevent
free-riding / avoid hold-up problems / resolving borrower’s distress
more efficiently
Large syndicates ⇒ exploit scale economies / develop reputation
Syndicated loans in EME vs DE: higher spreads (172 bp vs 160) /
lower maturities (55 vs 81 months) / larger arranger’s share (14% vs
11%)
First research (to my knowledge) identifying the factors that
influence the design of bank loan syndicates in emerging markets
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

24. Overview Motivations Literature Empirical design Results Summary & Perspectives
Arranger’s share of the loan = signal on borrower’s quality / align
monitoring incentives / commitment device for monitoring effort
Small syndicates ⇒ minimize management costs / prevent
free-riding / avoid hold-up problems / resolving borrower’s distress
more efficiently
Large syndicates ⇒ exploit scale economies / develop reputation
Syndicated loans in EME vs DE: higher spreads (172 bp vs 160) /
lower maturities (55 vs 81 months) / larger arranger’s share (14% vs
11%)
First research (to my knowledge) identifying the factors that
influence the design of bank loan syndicates in emerging markets
Test the role of several loan characteristics (following Lee and
Mullineaux, 2004) + the role of country-level variables for banking
environment on the design of bank syndicates in EME (Esty and
Megginson, 2003; Qian and Strahan, 2007)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 6/ 19

25. Overview Motivations Literature Empirical design Results Summary & Perspectives
Identify the determinants of the size and composition of loan
syndicates, all on developed economies
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 7/ 19

26. Overview Motivations Literature Empirical design Results Summary & Perspectives
Identify the determinants of the size and composition of loan
syndicates, all on developed economies
Lee and Mullineux, 2004; Jones, Lang and Nigro, 2005; Bosch
and Steffen, 2006; Champagne and Kryzanowski, 2007; Fran¸ois
c
and Missonier-Piera, 2007; Sufi, 2007
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 7/ 19

27. Overview Motivations Literature Empirical design Results Summary & Perspectives
Identify the determinants of the size and composition of loan
syndicates, all on developed economies
Lee and Mullineux, 2004; Jones, Lang and Nigro, 2005; Bosch
and Steffen, 2006; Champagne and Kryzanowski, 2007; Fran¸ois
c
and Missonier-Piera, 2007; Sufi, 2007
Syndicated loans issues in emerging markets
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 7/ 19

28. Overview Motivations Literature Empirical design Results Summary & Perspectives
Identify the determinants of the size and composition of loan
syndicates, all on developed economies
Lee and Mullineux, 2004; Jones, Lang and Nigro, 2005; Bosch
and Steffen, 2006; Champagne and Kryzanowski, 2007; Fran¸ois
c
and Missonier-Piera, 2007; Sufi, 2007
Syndicated loans issues in emerging markets
Nini (2004): participation of local bank in loan syndicates /
Altunbas and Gadanecz (2004): determinants of loan pricing for
syndicated loans / Godlewski and Weill (2008): determinants of
the decision to syndicate a loan to borrowers in EME
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 7/ 19

29. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

30. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

31. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Loan and country characteristics
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

32. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Loan and country characteristics
Data for loans from Dealscan (LPC, Reuters)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

33. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Loan and country characteristics
Data for loans from Dealscan (LPC, Reuters)
Data for country-level variables from La Porta et al. (1998), Beck
et al. (2000) and Barth et al. (2005)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

34. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Loan and country characteristics
Data for loans from Dealscan (LPC, Reuters)
Data for country-level variables from La Porta et al. (1998), Beck
et al. (2000) and Barth et al. (2005)
Completed and fully confirmed deals (excluding private placements)
⇒ sample of 10,930 loans from 50 EME between 1990 and 2006
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

35. Overview Motivations Literature Empirical design Results Summary & Perspectives
Dependant variables Number of Lenders and Number of Arrangers
Focus: factors that influence the benefits / the costs of loan
syndication
Loan and country characteristics
Data for loans from Dealscan (LPC, Reuters)
Data for country-level variables from La Porta et al. (1998), Beck
et al. (2000) and Barth et al. (2005)
Completed and fully confirmed deals (excluding private placements)
⇒ sample of 10,930 loans from 50 EME between 1990 and 2006
Poisson regressions (various specifications)
Number of Lenders = f (Loan characteristics, Banking and financial structure,
Banking regulation, Legal environment)
Number of Arrangers = g (Loan characteristics, Banking and financial structure,
Banking regulation, Legal environment)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 8/ 19

36. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

37. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

38. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

39. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Guarantors =1 if there is at least “observed risk” +/-
one guarantor / signalling
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

40. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Guarantors =1 if there is at least “observed risk” +/-
one guarantor / signalling
Senior Debt =1 if the debt is senior control - moral hazard +/-
/ signalling
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

41. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Guarantors =1 if there is at least “observed risk” +/-
one guarantor / signalling
Senior Debt =1 if the debt is senior control - moral hazard +/-
/ signalling
Covenants =1 if the loan agreement control - moral hazard +/-
includes covenants / signalling
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

42. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Guarantors =1 if there is at least “observed risk” +/-
one guarantor / signalling
Senior Debt =1 if the debt is senior control - moral hazard +/-
/ signalling
Covenants =1 if the loan agreement control - moral hazard +/-
includes covenants / signalling
S&P Rating =1 if a Standard & Poor’s transparency +
senior debt rating exists
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

43. Overview Motivations Literature Empirical design Results Summary & Perspectives
Individual variables - Loan characteristics
Tab. 1 Individual variables - Loan characteristics
Variable Description Argument Expected
sign
Loan size log of loan size (M USD) diversification +
regulatory compliance
Maturity in months re-contracting - moral +/-
hazard / signalling
Guarantors =1 if there is at least “observed risk” +/-
one guarantor / signalling
Senior Debt =1 if the debt is senior control - moral hazard +/-
/ signalling
Covenants =1 if the loan agreement control - moral hazard +/-
includes covenants / signalling
S&P Rating =1 if a Standard & Poor’s transparency +
senior debt rating exists
Borrower frequency of borrower reputation +
Presence in the sample / transparency
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 9/ 19

44. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

45. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

46. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Concentration assets of three largest banks / market power -
total banking assets / rents
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

47. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Concentration assets of three largest banks / market power -
total banking assets / rents
Stock markets value of listed shares / GDP transparency +/-
/ competition
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

48. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Concentration assets of three largest banks / market power -
total banking assets / rents
Stock markets value of listed shares / GDP transparency +/-
/ competition
Private Bond private debt securities / GDP transparency +/-
markets / competition
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

49. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Concentration assets of three largest banks / market power -
total banking assets / rents
Stock markets value of listed shares / GDP transparency +/-
/ competition
Private Bond private debt securities / GDP transparency +/-
markets / competition
Public Bond public debt securities / GDP transparency +/-
markets / competition
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

50. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking structure and financial development
Tab. 2 Country variables - Banking structure and financial development
Variable Description Argument Expected
sign
Overheads banking overhead costs / cost sharing +
total banking assets / inefficiency
Concentration assets of three largest banks / market power -
total banking assets / rents
Stock markets value of listed shares / GDP transparency +/-
/ competition
Private Bond private debt securities / GDP transparency +/-
markets / competition
Public Bond public debt securities / GDP transparency +/-
markets / competition
Syndicated Loan number of loan issues reputation +
Issues in a particular country
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 10/ 19

51. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking regulation
Tab. 3 Country variables - Banking regulation
Variable Description Argument Expected
sign
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 11/ 19

52. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking regulation
Tab. 3 Country variables - Banking regulation
Variable Description Argument Expected
sign
Mincar minimum capital requirement compliance / +/-
value capitalization
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 11/ 19

53. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking regulation
Tab. 3 Country variables - Banking regulation
Variable Description Argument Expected
sign
Mincar minimum capital requirement compliance / +/-
value capitalization
Credit Risk =1 if the minimum regulatory compliance / +/-
capital ratio varies with credit risk capitalization
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 11/ 19

54. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking regulation
Tab. 3 Country variables - Banking regulation
Variable Description Argument Expected
sign
Mincar minimum capital requirement compliance / +/-
value capitalization
Credit Risk =1 if the minimum regulatory compliance / +/-
capital ratio varies with credit risk capitalization
NPL Definition =1 if a formal definition of NPL information / +
exists transparency
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 11/ 19

55. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Banking regulation
Tab. 3 Country variables - Banking regulation
Variable Description Argument Expected
sign
Mincar minimum capital requirement compliance / +/-
value capitalization
Credit Risk =1 if the minimum regulatory compliance / +/-
capital ratio varies with credit risk capitalization
NPL Definition =1 if a formal definition of NPL information / +
exists transparency
Abroad Loan =1 if banks are prohibited from diversification +
Prohibited granting loans abroad
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 11/ 19

56. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Legal environment
Tab. 4 Country variables - Legal environment
Variable Description Argument Expected
sign
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 12/ 19

57. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Legal environment
Tab. 4 Country variables - Legal environment
Variable Description Argument Expected
sign
Creditor Rights index (0 weak - 4 strong) of moral hazard / +/-
creditor rights risk sharing
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 12/ 19

58. Overview Motivations Literature Empirical design Results Summary & Perspectives
Country variables - Legal environment
Tab. 4 Country variables - Legal environment
Variable Description Argument Expected
sign
Creditor Rights index (0 weak - 4 strong) of moral hazard / +/-
creditor rights risk sharing
Rule of Law index (0 weak - 10 strong) of moral hazard / +/-
law enforcement risk sharing
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 12/ 19

59. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

60. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Number of Lenders 11.29 8.12 2 78
Number of Arrangers 3.03 2.94 1 32
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

61. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Number of Lenders 11.29 8.12 2 78
Number of Arrangers 3.03 2.94 1 32
Loan Size 206.92 903.52 0.02 81,078.45
Maturity 54.33 39.13 1 600
Guarantors 0.08 0.28 0 1
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

62. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Number of Lenders 11.29 8.12 2 78
Number of Arrangers 3.03 2.94 1 32
Loan Size 206.92 903.52 0.02 81,078.45
Maturity 54.33 39.13 1 600
Guarantors 0.08 0.28 0 1
Overheads 0.03 0.02 0.01 0.14
Concentration 0.56 0.18 0.24 1
Stock Market 0.89 1.01 0 4.99
Private Bonds Market 0.17 0.15 0 0.55
Public Bonds Market 0.15 0.12 0 0.53
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

63. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Number of Lenders 11.29 8.12 2 78
Number of Arrangers 3.03 2.94 1 32
Loan Size 206.92 903.52 0.02 81,078.45
Maturity 54.33 39.13 1 600
Guarantors 0.08 0.28 0 1
Overheads 0.03 0.02 0.01 0.14
Concentration 0.56 0.18 0.24 1
Stock Market 0.89 1.01 0 4.99
Private Bonds Market 0.17 0.15 0 0.55
Public Bonds Market 0.15 0.12 0 0.53
Credit Risk 0.16 0.37 0 1
Mincar 8.68 1.36 8 12
NPL Definition 0.67 0.46 0 1
Abroad Loan Prohibited 0.40 0.49 0 1
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

64. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 5 Descriptive statistics
Variable Mean Std. dev. Min. Max
Number of Lenders 11.29 8.12 2 78
Number of Arrangers 3.03 2.94 1 32
Loan Size 206.92 903.52 0.02 81,078.45
Maturity 54.33 39.13 1 600
Guarantors 0.08 0.28 0 1
Overheads 0.03 0.02 0.01 0.14
Concentration 0.56 0.18 0.24 1
Stock Market 0.89 1.01 0 4.99
Private Bonds Market 0.17 0.15 0 0.55
Public Bonds Market 0.15 0.12 0 0.53
Credit Risk 0.16 0.37 0 1
Mincar 8.68 1.36 8 12
NPL Definition 0.67 0.46 0 1
Abroad Loan Prohibited 0.40 0.49 0 1
Creditor Rights 2.77 1.26 0 4
Rule of Law 6.35 1.81 1.9 8.57
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 13/ 19

65. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 6 Results - Benchmark
Variable Number of Lenders Number of Arrangers
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 14/ 19

66. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 6 Results - Benchmark
Variable Number of Lenders Number of Arrangers
Intercept -5.3215∗∗∗ -6.7571∗∗∗
Loan Size 0.3368∗∗∗ 0.3131∗∗∗
Maturity -0.0015∗∗∗ 0.0010∗∗
Guarantors 0.0466∗∗ 0.0068
Sponsors 0.0050 -0.0729∗
Covenants 0.0554∗∗ -0.0246
Senior Debt -0.1147∗∗∗ -0.1598∗∗∗
S&P Rating 0.0186 0.0585
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 14/ 19

67. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 6 Results - Benchmark
Variable Number of Lenders Number of Arrangers
Intercept -5.3215∗∗∗ -6.7571∗∗∗
Loan Size 0.3368∗∗∗ 0.3131∗∗∗
Maturity -0.0015∗∗∗ 0.0010∗∗
Guarantors 0.0466∗∗ 0.0068
Sponsors 0.0050 -0.0729∗
Covenants 0.0554∗∗ -0.0246
Senior Debt -0.1147∗∗∗ -0.1598∗∗∗
S&P Rating 0.0186 0.0585
Borrower Presence 0.0045∗∗ 0.0097∗∗∗
Syndicated Loans Issues 0.0001∗∗ 0.0001∗∗
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 14/ 19

68. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 6 Results - Benchmark
Variable Number of Lenders Number of Arrangers
Intercept -5.3215∗∗∗ -6.7571∗∗∗
Loan Size 0.3368∗∗∗ 0.3131∗∗∗
Maturity -0.0015∗∗∗ 0.0010∗∗
Guarantors 0.0466∗∗ 0.0068
Sponsors 0.0050 -0.0729∗
Covenants 0.0554∗∗ -0.0246
Senior Debt -0.1147∗∗∗ -0.1598∗∗∗
S&P Rating 0.0186 0.0585
Borrower Presence 0.0045∗∗ 0.0097∗∗∗
Syndicated Loans Issues 0.0001∗∗ 0.0001∗∗
N 10,930 8,747
Pseudo R 2 0.2242 0.1192
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 14/ 19

69. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 7 Results - Banking structure and financial development
Variable Lenders Arrangers Lenders Arrangers
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 15/ 19

70. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 7 Results - Banking structure and financial development
Variable Lenders Arrangers Lenders Arrangers
Overheads 2.4280∗∗∗ 4.6426∗∗∗
Concentration -0.1430∗∗∗ 0.2115∗∗
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 15/ 19

71. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 7 Results - Banking structure and financial development
Variable Lenders Arrangers Lenders Arrangers
Overheads 2.4280∗∗∗ 4.6426∗∗∗
Concentration -0.1430∗∗∗ 0.2115∗∗
Stock Markets -0.0072 0.0177
Private Bond Markets -0.6745∗∗∗ -0.0615
Public Bond Markets 0.1332 -0.5598∗∗∗
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 15/ 19

72. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 7 Results - Banking structure and financial development
Variable Lenders Arrangers Lenders Arrangers
Overheads 2.4280∗∗∗ 4.6426∗∗∗
Concentration -0.1430∗∗∗ 0.2115∗∗
Stock Markets -0.0072 0.0177
Private Bond Markets -0.6745∗∗∗ -0.0615
Public Bond Markets 0.1332 -0.5598∗∗∗
N 10,207 8,342 8,376 7,101
Pseudo R 2 0.2323 0.1253 0.2106 0.1189
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 15/ 19

73. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 8 Results - Banking regulation and legal environment
Variable Lenders Arrangers Lenders Arrangers
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 16/ 19

74. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 8 Results - Banking regulation and legal environment
Variable Lenders Arrangers Lenders Arrangers
Mincar*Credit Risk 0.0058∗ -0.0023
NPL Definition 0.1757∗∗∗ -0.1441∗∗∗
Abroad Loan Prohibited 0.1271∗∗∗ 0.0249
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 16/ 19

75. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 8 Results - Banking regulation and legal environment
Variable Lenders Arrangers Lenders Arrangers
Mincar*Credit Risk 0.0058∗ -0.0023
NPL Definition 0.1757∗∗∗ -0.1441∗∗∗
Abroad Loan Prohibited 0.1271∗∗∗ 0.0249
Creditor Rights -0.0252∗∗ 0.0750∗∗∗
Rule of Law -0.0017 -0.0447∗∗∗
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 16/ 19

76. Overview Motivations Literature Empirical design Results Summary & Perspectives
Tab. 8 Results - Banking regulation and legal environment
Variable Lenders Arrangers Lenders Arrangers
Mincar*Credit Risk 0.0058∗ -0.0023
NPL Definition 0.1757∗∗∗ -0.1441∗∗∗
Abroad Loan Prohibited 0.1271∗∗∗ 0.0249
Creditor Rights -0.0252∗∗ 0.0750∗∗∗
Rule of Law -0.0017 -0.0447∗∗∗
N 9,108 7,265 8,724 7,144
Pseudo R 2 0.2358 0.1168 0.2403 0.1252
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 16/ 19

77. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

78. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

79. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

80. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Results for loan characteristics in line with Lee and Mullineaux
(2004) (loan size, lender protection)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

81. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Results for loan characteristics in line with Lee and Mullineaux
(2004) (loan size, lender protection)
Results for legal environment in line with Esty and Megginson
(2003) (mitigate legal / re-contracting risk)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

82. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Results for loan characteristics in line with Lee and Mullineaux
(2004) (loan size, lender protection)
Results for legal environment in line with Esty and Megginson
(2003) (mitigate legal / re-contracting risk)
Large (smaller) syndicates if costly (concentrated) banks
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

83. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Results for loan characteristics in line with Lee and Mullineaux
(2004) (loan size, lender protection)
Results for legal environment in line with Esty and Megginson
(2003) (mitigate legal / re-contracting risk)
Large (smaller) syndicates if costly (concentrated) banks
Bonds market = competitor to syndicated market
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

84. Overview Motivations Literature Empirical design Results Summary & Perspectives
Empirical evidence to explain the role of loan characteristics in the
design of loan syndicates in EME
Banking structure, financial development, banking regulation, and
legal environment influence the syndicate design
Syndicates designed to exploit benefits of syndication and to
minimize agency problems
Results for loan characteristics in line with Lee and Mullineaux
(2004) (loan size, lender protection)
Results for legal environment in line with Esty and Megginson
(2003) (mitigate legal / re-contracting risk)
Large (smaller) syndicates if costly (concentrated) banks
Bonds market = competitor to syndicated market
Regulation of bank capital and activities increases syndicate size
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 17/ 19

85. Overview Motivations Literature Empirical design Results Summary & Perspectives
Measure the design with concentration index (HHI, arranger’s share,
...)
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 18/ 19

86. Overview Motivations Literature Empirical design Results Summary & Perspectives
Measure the design with concentration index (HHI, arranger’s share,
...)
⇒ Results in line with existing research
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 18/ 19

87. Overview Motivations Literature Empirical design Results Summary & Perspectives
Measure the design with concentration index (HHI, arranger’s share,
...)
⇒ Results in line with existing research
Measure the composition of the syndicate
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 18/ 19

88. Overview Motivations Literature Empirical design Results Summary & Perspectives
Measure the design with concentration index (HHI, arranger’s share,
...)
⇒ Results in line with existing research
Measure the composition of the syndicate
% of foreign lenders, foreign arrangers . . .
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 18/ 19

89. Overview Motivations Literature Empirical design Results Summary & Perspectives
Measure the design with concentration index (HHI, arranger’s share,
...)
⇒ Results in line with existing research
Measure the composition of the syndicate
% of foreign lenders, foreign arrangers . . .
share retained by lender according to his status / nationality . . .
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 18/ 19

90. Overview Motivations Literature Empirical design Results Summary & Perspectives
Thank you
Christophe J. Godlewski LaRGE, University of Strasbourg
The Design of Bank Loan Syndicates in Emerging Markets Economics 19/ 19