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CATEGORIES:Cambridge Finance Workshop Series
SUMMARY:Mind the Gap: The Difference between US and Europe
 an Loan Rates - Anthony Saunders – John M. Schiff 
 Professorship in Finance - Stern
DTSTART;TZID=Europe/London:20150506T130000
DTEND;TZID=Europe/London:20150506T140000
UID:TALK57903AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/57903
DESCRIPTION:Abstract:       \n\nCarey and Nini (2007) provide 
 evidence that interest rate spreads on syndicated 
 loans\ndiffered systematically between the Europea
 n and the US market during the 1992 to 2002\nperio
 d. Loan spreads in Europe are\, on average\, about
  30 basis points smaller than in the\nUS. We show 
 that accounting for unused fees (AISU) fully expla
 ins the pricing puzzle for\nlines of credit. While
  European borrowers pay a significantly lower AISD
 \, they also pay a\nsignificantly higher AISU. For
  term loans\, we document a systematic selection e
 ffect:\nFirms with high borrowing costs in the mar
 ket for lines of credit  as measured via the\nAISD
  and AISU  are more likely to also be active in th
 e term loan market. This selection\neffect is sign
 ificantly smaller in Europe and explains 50-90% of
  the pricing difference\nbetween US and European t
 erm loans. These results are consistent with commi
 tments being\nexclusively provided by banks\, whil
 e term funding is subject to a selection effect de
 pending\non the availability of outside options fo
 r borrowing via bond markets.\n"Link to paper":htt
 p://papers.ssrn.com/sol3/papers.cfm?abstract_id=23
 61066 
LOCATION:10 Trumpington Street
CONTACT:Cerf Admin
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