Universal banks and corporate control: evidence from the global syndicated loan market

Banks play a role in the corporate governance of firms as well as acting as debtfinanciers around the world. Universal banks can have control over borrowing firmsby representation on the board of directors or by holding shares through direct stakesor institutional holdings. We investigate the effects of these bank-firm governancelinks on the global syndicated loan market. We find that banks are more likely to actas lead arrangers, charge higher interest rate spreads and face less credit risk afterorigination when they have some role in firm’s governance. This increase in interestrate spread is less pronounced for borrowers...