We investigate the impact of a shock to the information set of syndicated-loan lead arrangers on the terms of newly issued loans. We find that loans issued by arrangers with greater access to information suffer from lower liquidity in the secondary market and carry higher spreads and more collateral at issuance. We also find that lead arrangers take longer to form syndicates, attract fewer passive lenders, and retain larger stakes of loans at initiation. On the other side, lead arrangers appear to pass the higher lending costs onto captive borrowers, and to profit from both greater lending volumes and higher arranging fees.

Keywords: Syndicated loans, information asymmetry