Browsing by Author "Cunha, M. Ricardo"
Now showing 1 - 1 of 1
Results Per Page
Sort Options
- How banks price loans for LBOs: an empirical analysis of spread determinantsPublication . Alves, Paulo P.; Cunha, M. Ricardo; Pacheco, Luís K.; Pinto, João M.This paper examines which factors determine the pricing of loans for LBOs, using a worldwide sample of 11,111 loans closed in the 2000–2016 period. Our findings are consistent with the hypotheses that loans for LBOs extended to borrowers in market- versus bank-based financial systems are differently priced, and that law and institutional characteristics are important determinants of spreads for deals closed in market-oriented countries. Despite LBO loan pricing differing significantly in normal versus crisis times, loans extended to borrowers in market-based financial systems have higher spreads than those where banks play a major role. Our results also support the hypothesis of tranching as a mechanism of reducing spreads by completing financial markets and mitigating informational asymmetries. Finally, a robust convex relationship between spread and maturity is found, suggesting higher market competition by banks and investors for standard, medium-term maturities.