AIB 2012 Conference Proceedings - Academy of International ...

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Structuring and Pricing of International Syndicated Corporate Loans
Ha-Chin Yi, Texas State University
Byung-uk Chong, Ewha Womans University, Seoul, Korea
This paper examines how syndicate structure affects the risk premium of internationally syndicated loans in
both developed and developing countries. Syndicate structure is an organizational response to information
asymmetry in syndicate composition. The lead bank assumes a risky position as a lender by retaining a fraction
of the loan, and also acts as the intermediary between the borrower and the syndicate participants by allocating
loan shares to participants. Between the two competing hypotheses of syndicate structure – concentration
hypothesis versus diversification hypothesis, most of the estimations support the diversification hypothesis. This
paper finds that a portion of loan retained by lead arranger is negatively related to loan risk premium. As the
riskiness of borrowing firm increases, lead arrangers and participating banks share the loan amounts since
participating banks may possess information through which they can assess the riskiness of the borrowing firm
as accurate as the lead arrangers do. Therefore, a lead arranger intends to provide appropriate risk premium to
participating banks in order to seek for their syndicate participation; otherwise, the lead bank should be willing
to retain more loan shares to credibly signal to participants to certify loan quality. (For more information, please
contact: Ha-Chin Yi, Texas State University, USA: hy11@txstate.edu)
Executives as Agents: Expatriate Managers in Subsidiaries of Multinational Banks
Hein Bogaard, George Washington University
Marketa Sonkova, Boston University
The theoretical and empirical literature on (international) banking identified a trade-off between the need for
local "soft" information on clients and the creation of information asymmetries between the principal (bank
headquarters) and the agent (a foreign subsidiary). This paper investigates how multinational banks manage
the trade-off through executive staffing in their emerging market subsidiaries. In particular, we create a unique
dataset to study how bank strategy and host country institutions affect the choice between home country and
host country executives. We anticipate that (i) strategies that require local knowledge or soft information create
a preference for host country executives and that (ii) weak institutions that reduce transparency and amplify
information asymmetries between principal and agent increase the preference for home country executives.
(For more information, please contact: Hein Bogaard, George Washington University, USA: hbogaard@gwu.edu)
Are Bank Dividends a Signal to Informed Depositors
Cristiano Forti, Fundação Getúlio Vargas
Rafael Felipe Schiozer, Fundação Getúlio Vargas
This study investigates whether the composition of bank debt affects payout policy. We exploit the features of
the Brazilian banking system, such as the existence of several closely held banks, owned and managed by a
small group of shareholders, for which shareholder-targeted signaling is implausible, and find that banks that
rely more on informed (institutional) depositors for funding pay larger dividends, controlling for other features.
During the financial crisis, when the Brazilian banking system suffered the contagion of the liquidity freeze in
international banking systems, this effect was even more pronounced, i.e. banks that relied on institutional
investors paid even higher dividends. This relationship reinforces the role of dividends as a costly and credible
signal about the quality of bank assets. (For more information, please contact: Rafael Felipe Schiozer, Fundação
Getúlio Vargas, Brazil: rafael.schiozer@fgv.br)
AIB 2012 Conference Proceedings
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