We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
How Banks Price Loans for LBOs: an Empirical Analysis of Spread Determinants *.
- Authors
Alves, Paulo P.; Cunha, M. Ricardo; Pacheco, Luís K.; Pinto, João M.
- Abstract
This paper examines which factors determine the pricing of loans for LBOs, using a worldwide sample of 11,111 loans closed in the 2000–2016 period. Our findings are consistent with the hypotheses that loans for LBOs extended to borrowers in market- versus bank-based financial systems are differently priced, and that law and institutional characteristics are important determinants of spreads for deals closed in market-oriented countries. Despite LBO loan pricing differing significantly in normal versus crisis times, loans extended to borrowers in market-based financial systems have higher spreads than those where banks play a major role. Our results also support the hypothesis of tranching as a mechanism of reducing spreads by completing financial markets and mitigating informational asymmetries. Finally, a robust convex relationship between spread and maturity is found, suggesting higher market competition by banks and investors for standard, medium-term maturities.
- Subjects
BANK loans; LEVERAGED buyouts; LOANS; BANKING industry; PRICES; FINANCIAL markets
- Publication
Journal of Financial Services Research, 2022, Vol 62, Issue 3, p163
- ISSN
0920-8550
- Publication type
Article
- DOI
10.1007/s10693-021-00355-y