Bank Capital and Lending: Evidence from Syndicated Loans

Using within-loan estimations to remove the impact of demand-side factors, we find that the capital levels of banks participating in the same syndicated loan are positively associated with the banks’ contributions to the loan. Consistent with the argument that higher capital reduces the cost of uninsured debt, the positive effect of bank capital on lending is stronger among banks that rely more on wholesale funding. Furthermore, we find that banks increase their contributions to syndicated loans after receiving Troubled Asset Relief Program (TARP) funding. Taken together, we provide new evidence on the importance and causal effect of bank capital on lending.

• Publication year

  2018

• Venue

  Journal of Financial and Quantitative Analysis

• Publication date

  2018-09-07

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.1017/S0022109018000698
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• Banks increase their contributions to syndicated loans after receiving TARP funding.

  Confidence 0.96

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• The positive association between bank capital and lending is stronger for banks that rely more on wholesale funding.

  Confidence 0.95

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• Higher bank capital is positively associated with larger contributions to syndicated loans.

  Confidence 0.98

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• Within-loan estimations are used to remove demand-side factors when relating bank capital to banks' contributions in the same syndicated loan.

  Confidence 0.97

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review

• bank capital

  financial metric

  The capital level of a bank used as the main explanatory bank characteristic in the study.

  Aliases: capital levels of banks

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• loan contribution

  loan measure

  The amount a bank commits or contributes to a syndicated loan.

  Aliases: banks' contributions to the loan, contributions to syndicated loans

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• syndicated loans

  loan structure

  Loans arranged by multiple banks in which participating banks each contribute a share of the credit.

  Aliases: syndicated loan

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• tarp funding

  government funding program

  Capital support received through the Troubled Asset Relief Program.

  Aliases: Troubled Asset Relief Program funding, TARP

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• wholesale funding

  funding source

  Bank funding obtained from market-based or non-deposit sources rather than core deposits.

  Aliases: reliance on wholesale funding

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review
• within-loan estimations

  method

  An estimation approach that compares banks within the same loan deal to control for deal-level demand factors.

  Aliases: within-loan estimate, within-loan estimation

  박진우 (dztg5apj7m) extraction뀨 (7c402c1b98) reviewKiller Whale (322360f1c1) reviewB (s683577b42) reviewq (76h6bfydm6) reviewAK (4715169a40) reviewAnonymous (n259mg7uxy) review

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