HOW BANK LOANS ARE PRICED: A COMPARATIVE STUDY BETWEEN ASIA AND WESTERN EUROPE

• Main Authors: Tosporn Chotigeat, Maretno Haroto, Ha-Chin Yi
• Format: Article
• Language: English
• Published: People & Global Business Association (P&GBA) 2008-09-01
• Series: Global Business and Finance Review
• Subjects: bank loans; loan pricing; global financial market; stream of interest income
• Online Access: http://www.gbfrjournal.org/pds/journal/thesis/20150622182449-3CJGM.pdf

Syndicated loan volume has grown tremendously to only domestically but also internationally. This empirical study compares loan pricing between two important segments of the global financial market, Asia and Europe, Using pooled GLS regression analysis on data of 3,425 service loans over the 170year period from 1990 to 2006. On average, loan spreads in Asia are narrower, although loan fees are larger. All-in-across continents, but Asian lenders favor more upfront fees over a continuous stream of interest income information problem varies. The proportion of secured loans is higher in Asia, a fact which may be a manifestation of borrowers’ credit risk. Interestingly, European loans are more heavily used to finance higher levels of moral hazard, i.e., severe events such as leverage buyouts(LBO).