Credit spread anchoring in the U.S. syndicated loan markets: Post financial crisis

OBJECTIVES OF THE STUDY: This thesis studies the credit spread anchoring effect in the US syndicated loan markets between years 2009 and 2015. Prior literature documents that the spread of a firm's prior loan correlates with the spread of a firm's new loan before the 2008 financial crisis. The focus is to examine how the 2008 financial crisis has influenced the effect and how it has evolved since. This thesis is the first study that evaluates the differences in the magnitude of the effect between publicly listed and private firms, between selected investment bank and commercial bank lead arrangers and between reputable and other lead arrangers. DATA: The sample consists of 43 508 syndicated loan observations in the US over the period 2000 to 2015. The final sample covers 8 791 loan-pair observations for the period 2009 to 2015. FINDINGS OF THE STUDY: This thesis documents that the anchoring on past deal terms still exists in the post financial crisis era in the US syndicated loan markets, but to a smaller extent compared to the pre-crisis era. The existence is documented to be stronger for publicly listed firms whereas only partial support for the existence of anchoring is found among private firms. Examining the differences between selected investment bank and commercial bank led syndicates; the results suggest that the investment banks are mainly subject to anchoring only if the anchoring benefits them. The anchoring effect is documented to be strongest in the syndicates where the lead arranger is regarded as a reputable lead arranger