Information Asymmetry in Syndicated Loans: The Cost of the Distribution Method

This paper examines the impact of the distribution method on the loan syndicate structure and spread. Although privately placed deals (club deals) are associated with riskier and less transparent borrowers than syndications, their average loan spread is lower. However, propensity score matching models show that even after removing their differences in characteristics between the two groups, club deals have a lower average spread than syndications.