We examine how borrower firm characteristics affect the size structure in the Japanese syndicated
loan market for the 1999-2003 period. Consistent with the view by Lee and Mullineaux (2004), we find
that syndicates are smaller when borrowers have higher credit risk, while firms with greater information
asymmetry are associated with larger syndicates in Japan. These results are primarily driven by nonkeiretsu
(non-business group) firms. This suggests that the role of enhanced monitoring and facilitated
renegotiation is especially useful for banks participating in Japanese syndicated loan for non-keiretsu
firms. On the other hand, information problems seem to be less severe for keiretsu (business group) firms
which tend to have easier access to syndicated loan via the intermediation of in-house banks in the
relevant syndicate. Finally, Keiretsu firms have less fraction of loan by the agent bank as the maturity
rises, while non-keiretsu firms have greater fraction of loan by the agent bank as the maturity rises. It
appears that main banks of keiretsu firms with informational advantage are forced to retain more of the
loan and form a more concentrated syndicate to 'signal” that the loan is of high quality. This further
confirms the view that information problems are less severe in the keiretsu firms.
