Is the Corporate Loan Market Globally Integrated? A Pricing Puzzle

摘要: We offer evidence that interest rate spreads on syndicated loans to corporate borrowers are economically significantly smaller in Europe than the United States, other things equal. Differences borrower, loan, and lender characteristics do not appear explain this phenomenon. Borrowers overwhelmingly issue their natural home market bank portfolios display bias. This may why pricing discrepancies competed away, though causes remain a puzzle. Thus, important determinants of loan origination outcomes be identified, bias appears material for pricing, financing costs differ across States. WE OFFER EVIDENCE THAT PRICES OF SYNDICATED between European U.S. markets, with by about 30 basis points (bps) average over past decade, after controlling risk factors. The differences statistically significant. Levels larger riskier borrowers, but roughly 20% less comparable States spectrum. cannot reject hypothesis price as large today they were decade ago. control host factors known (or thought) affect debt decisions pricing. Although many controls correlated levels spreads, have little effect difference markets. Such can persist only if lenders fail compete it away. Though we focus provide some location borrowers’ lenders’ activity. data show stay when tend must abroad. Specifically, domiciled one major markets (Europe, Asia) almost always market, whereas elsewhere usually Europe. Lenders cross ∗ Federal Reserve Board. paper represents authors’ opinions necessarily those Board Governors, System, or members its staff. thank