Abstract
This paper studies the structure of syndicated loans and analyzes the participation of investment banks in syndicated loans. We find that investment banks are more likely to lead syndicated loans to riskier borrowers. They also tend to participate more in the riskier facilities of a multi-facility loan. Though non-bank financial institutions like finance companies, insurance companies, investment companies, CLOs, CDOs, mutual funds, and prime funds rarely lead a syndicated loan, they participate in the riskier facilities of a multi-facility syndicated loan. Maskara (2006) argues that multi-facility syndicated loans derive economic value from the participation of lender groups with varying levels of risk aversion. We provide empirical support for their theoretical assumptions.
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