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Tranching in the syndicated loan market around the world

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Abstract

Loan tranching allows banks to manage risk and facilitate firm financing, which may be essential for firms that cannot access investors from stock markets. We analyze the determinants and benefits of loan tranching by pooling the tranches of individual loans to create the largest cross-country sample of syndicated loans, covering more than 150,000 loans from multinational and domestic firms. We find that, in addition to market, deal, and borrower characteristics, legal and institutional differences impact loan tranching. Strong creditor protection and efficient debt collection increase the probability of tranching and reduce tranche spreads, ultimately promoting firms’ access to debt. We also find evidence that tranching facilitates the financing of multinational firms abroad due to the transfer of legal and cultural institutions to foreign subsidiaries. Overall, our results suggest that tranching plays an important role in reducing a country’s financial development gap and promotes firms’ access to debt.

Abstraite

Le découpage en tranches de prêts permet aux banques de gérer les risques et de faciliter le financement des firmes, ce qui peut être essentiel pour les firmes qui ne peuvent pas accéder aux investisseurs des marchés boursiers. Couvrant plus de 150 000 prêts d’entreprises multinationales et nationales, nous analysons les déterminants et les avantages du découpage en tranches de prêts en regroupant les tranches de prêts individuels afin de créer le plus grand échantillon transnational de prêts syndiqués. Nous constatons que, outre les caractéristiques du marché, des transactions et de l’emprunteur, des différences juridiques et institutionnelles influencent l’établissement des tranches de prêts. Une solide protection des créanciers et un recouvrement efficace de la dette augmentent les probabilités de découpage en tranches et réduisent les écarts de tranche, favorisant ainsi l’accès des entreprises à la dette. Nous trouvons également des preuves que les tranches facilitent le financement de firmes multinationales à l’étranger en raison du transfert d’institutions juridiques et culturelles à des filiales étrangères. Globalement, nos résultats suggèrent que les tranches jouent un rôle important dans la réduction de l’écart de développement financier d’un pays et favorisent l’accès des firmes à la dette.

Abstracto

La partición en tramos de préstamos permite a los bancos manejar riesgos y facilitar el financiamiento de empresas, lo cual puede ser esencial para empresas que no pueden acceder inversionistas en los mercados de capitales. Analizamos los determinantes y beneficios de partir los préstamos en tramos, al juntar los préstamos individuales particionados para crear la mayor muestra entre países de préstamos sindicados, cubriendo más de 150.000 préstamos de multinacionales y empresas nacionales. Encontramos que, además de las características del mercado, las operaciones y los prestamistas, las diferencias legales e institucionales impactan la partición en tramos de los préstamos. La fuerte protección a los acreedores y el cobro eficiente de deudas aumentan la probabilidad de partir los préstamos y reducen las diferencias en tasas o spreads, promoviendo a la larga el acceso a financiación de las empresas. Encontramos también evidencia de que la partición de los préstamos facilita el acceso a financiación de empresas multinacionales en el extranjero debido a la transferencia de instituciones legales y culturales de apoyo a las filiales extranjeras. En general, nuestros resultados sugieren que la partición de los préstamos en tramos juegan un papel importante en reducir la brecha de desarrollo financiero de un país y promueven el acceso a deuda.

Abstrato

O empréstimo em faixas de risco permite que os bancos gerenciem os riscos e facilitem o financiamento de empresas, o que pode ser essencial para as empresas que não podem acessar investidores do mercado de ações. Analisamos os determinantes e os benefícios do empréstimo em faixas agrupando faixas de empréstimos individuais para criar a maior amostra de empréstimos sindicalizados entre países, cobrindo mais de 150.000 empréstimos de empresas multinacionais e domésticas. Descobrimos que, além das características de mercado, do negócio e do mutuário, diferenças legais e institucionais afetam as faixas do empréstimo. Forte proteção ao credor e a cobrança eficiente da dívida aumentam a probabilidade de criação de faixas e reduzem o spread das faixas, promovendo, em última análise, o acesso de empresas ao financiamento. Também encontramos evidências de que faixas facilitam o financiamento de empresas multinacionais no exterior devido à transferência de instituições legais e culturais para subsidiárias estrangeiras. De modo geral, nossos resultados sugerem que faixas desempenham um papel importante na redução do hiato no desenvolvimento financeiro de um país e promove o acesso de empresas a financiamento.

摘要

贷款风险分级允许银行管理风险并促进公司融资, 这对于无法从股票市场获得投资者的公司而言可能是必不可少的。我们通过汇集单笔贷款证券来分析贷款风险分级的决定因素和收益, 以创建最大的跨国银团贷款样本, 涵盖来自跨国公司和国内公司的150,000多笔贷款。我们发现, 除市场、交易和借款人特征外, 法律和制度差异也影响贷款风险分级。强有力的债权人保护和有效收债提高风险分级的可能性并减少证券差价, 最终促进公司获得债务的机会。我们还发现了由于法律和文化制度向外国子公司的转移, 风险分级促进海外跨国公司融资的证据。总的来说, 我们的结果表明,风险分级在减少一个国家的金融发展差距和促进公司获得债务方面起着重要作用。

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Acknowledgements

We are indebted to the Editor, Lemma Senbet, an anonymous member of the JIBS editorial board, two anonymous reviewers, Kee-Hong Bae, William Bratton, Sofia Johan, Jeffrey Gordon, Pankaj Maskara, and Luc Renneboog for their very helpful comments and suggestions. We also wish to thank conference participants at the FMA meetings, and seminar participants in Amsterdam, ETZ, HSE-Moscow, Oxford, SKEMA Business School, Louvain, Tilburg, Yonsei, and York for their comments.

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Authors and Affiliations

  1. College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL, 33431, USA

    Douglas Cumming

  2. Birmingham Business School, University of Birmingham, Birmingham, B15 2TT, UK

    Douglas Cumming

  3. SKEMA Business School, Université Côte d’Azur and NBER, 60 Rue Fedor Dostoievski, 06902, Sophia Antipolis, France

    Florencio Lopez-de-Silanes

  4. Tilburg University and ECGI, Warandelaan 2, 5037 AB, Tilburg, The Netherlands

    Joseph A McCahery

  5. SKEMA Business School, Université Côte d’Azur, Avenue Willy Brandt, 59777, Euralille, France

    Armin Schwienbacher

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  1. Douglas Cumming
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Accepted by Lemma Senbet, Area Editor, 12 May 2019. This article has been with the authors for three revisions.

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Cumming, D., Lopez-de-Silanes, F., McCahery, J.A. et al. Tranching in the syndicated loan market around the world. J Int Bus Stud 51, 95–120 (2020). https://doi.org/10.1057/s41267-019-00249-1

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