Ownership dispersion across large shareholders and loan-syndicate structure

Yane Chandera; Lukas Setia-Atmaja; Cynthia Afriani Utama; Zaäfri Ananto Husodo

doi:10.1016/j.ribaf.2020.101334

Ownership dispersion across large shareholders and loan-syndicate structure

Yane Chandera, Lukas Setia-Atmaja, Cynthia Afriani Utama, Zaäfri Ananto Husodo

Department of Management

Research output: Contribution to journal › Article › peer-review

Abstract

This study tests the relationship between ownership dispersion across large shareholders and the structure of loan syndicates. The results of an analysis of a set of bank loan contracts that were extended to Indonesian listed firms, from 1992 to 2016, show that an uneven ownership distribution between the largest controlling shareholder and multiple large shareholders is associated with a smaller and more concentrated syndicate. In line with the agency and moral hazard theoretical framework, the results suggest that in a weak legal system, when banks are lending to companies that are at a high risk of expropriation, they decrease the syndicate size and increase the syndicate concentration in order to intensify their efforts in due diligence and monitoring.

Original language	English
Article number	101334
Journal	Research in International Business and Finance
Volume	55
DOIs	https://doi.org/10.1016/j.ribaf.2020.101334
Publication status	Published - Jan 2021

Keywords

Loan monitoring
Multiple large shareholders
Ownership dispersion
Syndicate concentration
Syndicate size

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10.1016/j.ribaf.2020.101334

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title = "Ownership dispersion across large shareholders and loan-syndicate structure",

abstract = "This study tests the relationship between ownership dispersion across large shareholders and the structure of loan syndicates. The results of an analysis of a set of bank loan contracts that were extended to Indonesian listed firms, from 1992 to 2016, show that an uneven ownership distribution between the largest controlling shareholder and multiple large shareholders is associated with a smaller and more concentrated syndicate. In line with the agency and moral hazard theoretical framework, the results suggest that in a weak legal system, when banks are lending to companies that are at a high risk of expropriation, they decrease the syndicate size and increase the syndicate concentration in order to intensify their efforts in due diligence and monitoring.",

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AU - Husodo, Zaäfri Ananto

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AB - This study tests the relationship between ownership dispersion across large shareholders and the structure of loan syndicates. The results of an analysis of a set of bank loan contracts that were extended to Indonesian listed firms, from 1992 to 2016, show that an uneven ownership distribution between the largest controlling shareholder and multiple large shareholders is associated with a smaller and more concentrated syndicate. In line with the agency and moral hazard theoretical framework, the results suggest that in a weak legal system, when banks are lending to companies that are at a high risk of expropriation, they decrease the syndicate size and increase the syndicate concentration in order to intensify their efforts in due diligence and monitoring.

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KW - Syndicate concentration

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