Is the Corporate Loan Market Globally Integrated? A Pricing Puzzle
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Finance Papers
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Finance
Finance and Financial Management
Finance and Financial Management
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Carey, Mark
Nini, Gregory Paul
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We offer evidence that interest rate spreads on syndicated loans to corporate borrowers are economically significantly smaller in Europe than in the United States, other things equal. Differences in borrower, loan, and lender characteristics do not appear to explain this phenomenon. Borrowers overwhelmingly issue in their natural home market and bank portfolios display home bias. This may explain why pricing discrepancies are not competed away, though their causes remain a puzzle. Thus, important determinants of loan origination market outcomes remain to be identified, home bias appears to be material for pricing, and corporate financing costs differ across Europe and the United States.
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2007-01-01
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The Journal of Finance
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At the time of publication, author Gregory Paul Nini was affiliated with the Federal Reserve Board. Currently, he is a faculty member at the Wharton School at the University of Pennsylvania.