Syndicated Lending Relationships, Information Asymmetry, and Market Making in the Secondary Loan Market
Name
J of Accounting Research - 2025 - PHILLIPS - Syndicated Lending Relationships Information Asymmetry and Market Making in.pdf
Description
Published version
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376.01 KB
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Adobe PDF
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8bf51a7f704f27a1d2531a802bfcfcd0
Author(s)
PHILLIPS, MATTHEW A
Date Issued
July 16, 2025
Journal
Journal of Accounting Research
Publisher
Wiley
Citation
PHILLIPS, M.A. (2025), Syndicated Lending Relationships, Information Asymmetry, and Market Making in the Secondary Loan Market. Journal of Accounting Research.
Version
Final published version
Abstract
This paper investigates why commercial lenders make markets for the loansthat they sell on the secondary market. Using loan-level data, I find thatorigination lenders with extensive borrower relationships and more repu-tational capital at stake are more likely to serve as market makers. Greaterparticipation of origination lenders as market makers is associated with lowertrading costs for their borrowers’ loans. This association remains even in con-ditions where origination lenders could exploit their information advantagefor market making profits. Lenders benefit from being market makers bymaintaining strong subsequent lending relationships with their borrowers.Collectively, this evidence is consistent with origination lenders’ participationin the secondary market being motivated by reducing trading frictions ratherthan market making profits.
MIT Department
Sloan School of Management
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Creative Commons Attribution
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DOI of Published Version
https://doi.org/10.1111/1475-679X.70000
