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SUMMARY:Mind the Gap: The Difference between US and European Loan Rates - 
 Anthony Saunders – John M. Schiff Professorship in Finance - Stern
DTSTART:20150506T120000Z
DTEND:20150506T130000Z
UID:TALK57903@talks.cam.ac.uk
CONTACT:Cerf Admin
DESCRIPTION:Abstract:       \n\nCarey and Nini (2007) provide evidence tha
 t interest rate spreads on syndicated loans\ndiffered systematically betwe
 en the European and the US market during the 1992 to 2002\nperiod. Loan sp
 reads in Europe are\, on average\, about 30 basis points smaller than in t
 he\nUS. We show that accounting for unused fees (AISU) fully explains the 
 pricing puzzle for\nlines of credit. While European borrowers pay a signif
 icantly lower AISD\, they also pay a\nsignificantly higher AISU. For term 
 loans\, we document a systematic selection effect:\nFirms with high borrow
 ing costs in the market for lines of credit  as measured via the\nAISD and
  AISU  are more likely to also be active in the term loan market. This sel
 ection\neffect is significantly smaller in Europe and explains 50-90% of t
 he pricing difference\nbetween US and European term loans. These results a
 re consistent with commitments being\nexclusively provided by banks\, whil
 e term funding is subject to a selection effect depending\non the availabi
 lity of outside options for borrowing via bond markets.\n"Link to paper":h
 ttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2361066 
LOCATION:10 Trumpington Street
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