Papers by Anthony Saunders
Credit Risk Management in and Out of the Financial Crisis
While existing literature has documented the benefits of relationship banking for small privately... more While existing literature has documented the benefits of relationship banking for small privately held businesses, there is little empirical work that examines whether lending relationships provide significant (if any) benefits to larger borrowers. Our paper addresses this question. Unlike earlier studies we analyze the effects of borrowing from relationship lenders for large borrowers who have access to public capital markets. We find that, on average, borrowing from a relationship lender translates into a 5 to 15 basis point lowering of interest rates for a large borrower and that these benefits are significantly larger for borrowers facing higher information asymmetries. We also examine other non-price features of large borrowers’ loan facilities, such as maturity and collateral. Importantly, our’s is the first paper to estimate the impact of these variables using a simultaneous equations approach which recognizes the joint determination of price and non-price terms. Our results ...
Monetary Economics, 2001
We study empirically the effect of focus (specialization) versus diversification on the return an... more We study empirically the effect of focus (specialization) versus diversification on the return and the risk of banks using data from 105 Italian banks over the period 1993–99. Specifically, we analyse the trade-offs between (loan portfolio) focus and diversification using a unique data set that is able to identify individual bank loan exposures to different industries, to different sectors and to different geographical regions. Our results are consistent with a theory that predicts a deterioration in bank monitoring quality at high levels of risk and a deterioration in bank monitoring quality upon lending expansion into newer or competitive industries. We find that industrial loan diversification reduces bank return while endogenously producing riskier loans for all banks in our sample; this effect being most powerful for high-risk banks. Sectoral loan diversification produces an inefficient risk–return trade-off only for high-risk banks. Geographical diversification on the other ha...
Lim and Saunders investigate two interrelated topics, initial public offerings (IPOs) and venture... more Lim and Saunders investigate two interrelated topics, initial public offerings (IPOs) and venture capitalists. They analyze the seemingly elementary notion of whether venture capitalists add value to the IPO process. The not-unexpected answer is yes. But the answer to how, why, and when value is created is less obvious; this is the study's analytical focus. The authors' contribution to our understanding of both investment analysis and corporate financing is a very welcome addition to the Research Foundation's publications. The authors begin their study by filling theoretical and policy gaps vacated by the paucity of scholarly literature. They guide us through a description of the offering process and present the results of prior empirical IPO return studies. They describe the characteristics of IPO issues and explain the commonplace but not well-understood practice of underpricing. In the analytical part of the study, the authors introduce their Dynamic Strategy Model. This three-step method for analyzing IPOs consists of the IPO, aftermarket, and seasoned issue stages. The model is attractive because of its ability to probe concurrently all three stages of the process; prior studies focused on only one of the three steps. The authors use the model to test several hypotheses regarding the role of venture capitalists in each of the IPO stages. They find that: (1) underpricing is greater for venture-capital-backed issues than for nonventure-capitalbacked ones; (2) seasoned issues are offered earlier for venture-backed firms than for those which are not so backed; and (3) good firms follow the Dynamic Strategy Model. Inferentially, the study suggests that the venture capitalist's presence at the IPO stage may be a useful screen for seasoned issues. For investment professionals, this study is must reading. Before long venture-backed IPOs will find their proper niche in the asset allocation process. Better to travel with the compass and sextant that Lim and Saunders provide than to go into these waters ill-equipped.
Credit Risk Management in and Out of the Financial Crisis
In this paper, we study the organizational form of loan syndicates, how banks choose their syndic... more In this paper, we study the organizational form of loan syndicates, how banks choose their syndicate partners and how this a¤ects syndicate structure, loan contract terms, and borrower performance as well as bankspro
tability. We develop a set of novel measures in terms of the distance in lending expertise with respect to both borrower industry and geographic location between any two lenders and relate these measures to the organizational form of loan syndicates. We
nd that lead arrangers choose banks that have a similar focus in terms of lending expertise (i.e., close competitors) and give these banks more senior roles in the syndicate. We also
nd that these more senior syndicate members hold larger loan shares. Meanwhile, borrowers bene
t from this organizational design by paying lower interest spreads. These imply that syndicate members that are close to lead arrangers are delegated some monitoring responsibilities and thus can lower the overall loan syndication costs. We do n...
This is an updated and revised paper from the authorsâ¬" report on â¬SAn Analysis and Critiq... more This is an updated and revised paper from the authorsâ¬" report on â¬SAn Analysis and Critique of the BIS Proposal on Capital Adequacy and Ratingsâ¬? [S-CDM-00-02] (submitted to the BIS and published in the Journal of Banking & Finance 25:1 January, 2001). This paper was first prepared for the NYU Salomon Center/University of Maryland research project on â¬SThe Role of Credit Reporting Systems in the International Economy,â¬? sponsored by the Center for International Political Economy. It was prepared for the projectâ¬"s conference in Washington D.C. on March 1-2, 2001 at the headquarters of the World Bank.
Emu - Austral Ornithology
... Large honeyeaters, Anthochaera and Philemon spp., are mostly nectarivorous (McFarland and For... more ... Large honeyeaters, Anthochaera and Philemon spp., are mostly nectarivorous (McFarland and Ford 1991), but have also been described as ... when nectar is scarce, comprises a large proportion of foraging time for the Regent Honeyeater, Xanthomyza phrygia, another large ...
Journal of Money, Credit and Banking
The multinational syndicated loan market has crossed the $7 trillion threshold. Prior literature ... more The multinational syndicated loan market has crossed the $7 trillion threshold. Prior literature argues that weak borrower country’s creditor rights is the main limiting factor to cross-border lending. We find that lender country’s creditor rights can partly substitute for weak borrower creditor rights if a lender is from a better creditor rights country. Our results are robust to controlling for a borrower’s country laws, its foreign assets, the loan guarantees provided by its foreign parent, and its choice set of lenders.
SSRN Electronic Journal
Contrary to public perception and previous literature on public bailout subsidies, we find over t... more Contrary to public perception and previous literature on public bailout subsidies, we find over the recent 43-year period equityholders in big banks paid fairly for TBTF bailout insurance in terms of equity returns. In normal (non-crisis) periods, after TBTF in 1984, big banks pay an "insurance fee" for protection against severe losses in a crisis accepting a higher net regulatory burden reflected in a-9% per annum lower equity return relative to small banks. Moreover, a measure of left-tail risk protection, conditional on a crisis, fully explains this Big−Small bank equity premium "fee" paid in normal times. During crises, big banks earn higher returns (a reversal of that observed in normal times), which on average offset the big bank equity return discount in noncrisis times. Over several economic cycles, there is no abnormal Big−Small bank equity premium and bailout insurance is fairly priced for equityholders in that there is no difference between big and small bank equity returns.
Credit Risk Management in and Out of the Financial Crisis, 2011
Papeles De Economia Espanola, 2014
The Geneva Papers on Risk and Insurance Issues and Practice, 1981
Abstract We survey both academic and proprietary models to examine how macroeconomic,and systemat... more Abstract We survey both academic and proprietary models to examine how macroeconomic,and systematic risk effects are incorporated into measures of credit risk exposure. Many models consider the correlation between the probability of default (PD) and cyclical factors. Few models adjust loss rates (loss given default) to reflect cyclical effects. We find that the possibility of systematic correlation between PD and LGD is also neglected in currently available models.
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Papers by Anthony Saunders