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Lender individualism and monitoring: Evidence from syndicated loans

Lender individualism and monitoring: Evidence from syndicated loans
Lender individualism and monitoring: Evidence from syndicated loans
This paper addresses the question, “Does lenders’ culture affect their monitoring efforts and style?”, by exploringwhether lender individualism affects the loan monitoring of U.S. borrowers for a sample of 27,164 syndicatedloan facilities granted between 1998 and 2017. We proxy lender individualism based on the ancestral country oforigin of the lead bank’s CEO. We show that lender individualism leads to a less stringent monitoring style. We find that individualist lenders resort less to covenant monitoring, impose less strict contract terms, such asperformance pricing and rely more on soft information. We also provide evidence that individualist lendersretain a larger loan share and deal with a larger number of lenders. Finally, we find that some governancecharacteristics (board size and percentage of female directors) and other CEO features (cash compensation,tenure, and non-duality) moderate the negative association between lender individualism and loan monitoring
CEOs, Individualism, Monitoring, Covenants, Syndicate loans
1572-3089
Bermpei, Theodora
9549be8f-7acb-4f52-a237-3a093b9bb584
Degl'innocenti, Marta
22197ed0-702c-44b4-bcf5-7c7009ebf1f2
Kalyvas, Nikolaos A
b90c20b2-9fd4-4d5d-a123-34a193e1ca1d
Zhou, Si
c27aa301-e853-468b-83df-20cf98119ceb
Bermpei, Theodora
9549be8f-7acb-4f52-a237-3a093b9bb584
Degl'innocenti, Marta
22197ed0-702c-44b4-bcf5-7c7009ebf1f2
Kalyvas, Nikolaos A
b90c20b2-9fd4-4d5d-a123-34a193e1ca1d
Zhou, Si
c27aa301-e853-468b-83df-20cf98119ceb

Bermpei, Theodora, Degl'innocenti, Marta, Kalyvas, Nikolaos A and Zhou, Si (2023) Lender individualism and monitoring: Evidence from syndicated loans. Journal of Financial Stability, 66, [101123]. (doi:10.1016/j.jfs.2023.101123).

Record type: Article

Abstract

This paper addresses the question, “Does lenders’ culture affect their monitoring efforts and style?”, by exploringwhether lender individualism affects the loan monitoring of U.S. borrowers for a sample of 27,164 syndicatedloan facilities granted between 1998 and 2017. We proxy lender individualism based on the ancestral country oforigin of the lead bank’s CEO. We show that lender individualism leads to a less stringent monitoring style. We find that individualist lenders resort less to covenant monitoring, impose less strict contract terms, such asperformance pricing and rely more on soft information. We also provide evidence that individualist lendersretain a larger loan share and deal with a larger number of lenders. Finally, we find that some governancecharacteristics (board size and percentage of female directors) and other CEO features (cash compensation,tenure, and non-duality) moderate the negative association between lender individualism and loan monitoring

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Accepted/In Press date: 24 March 2023
e-pub ahead of print date: 28 March 2023
Additional Information: Publisher Copyright: © 2023 Elsevier B.V.
Keywords: CEOs, Individualism, Monitoring, Covenants, Syndicate loans

Identifiers

Local EPrints ID: 477537
URI: http://eprints.soton.ac.uk/id/eprint/477537
ISSN: 1572-3089
PURE UUID: b17dc53d-04b9-4b76-9b83-51aa34ec02cc
ORCID for Nikolaos A Kalyvas: ORCID iD orcid.org/0000-0003-4416-7032

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Date deposited: 07 Jun 2023 17:16
Last modified: 30 Oct 2023 08:36

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Contributors

Author: Theodora Bermpei
Author: Marta Degl'innocenti
Author: Nikolaos A Kalyvas ORCID iD
Author: Si Zhou

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