This research aims to investigate the supply structure of international syndicated loan markets in Asia. In this region, unlike other parts of the world, there is competition between Asianbanks—including Japanese banks—and Western banks. It is particularly important to note that in the Asian market it is possible to compare the leading Asian banks with Western banks. In addition, this study aims to examine how Asian banks compete with Western banks.
This analysis uses the framework of industrial organization. An investigation of market conduct, and the factors determining syndication size, elucidates the market structure. From the viewpoint of asymmetric information, regression models have been used to study the factors influencing the number of participating banks. In this study, the empirical analysis uses micro data (loan terms). Further, this study focuses on the competition between Asian and Western banks rather than on typical measures of market concentration.
The regression models provide the following results. A nonlinear relationship is found to exist between track record and syndication size. This result indicates that the reputation in the market reduces problems associated with asymmetric information. Companies that are rated or listed expand their syndication size and reveal additional credit information. Loan maturity and syndication scales are found to have a nonlinear relationship. The loan amount and credit line show expected positive effects on syndication size. This study reveals no significant results in terms of collaterals. The denomination of the Asian currencies, including the yen, displays negative effects; funding issues might be involved. The cases in which an Asian bank acts as an arranger have negative effects, implying that Asian and Western banks exhibit different market behavior.
Along with the leading Western banks, the leading Asian banks tend to extend facilities of longer maturity and the same syndication size to borrowers, with less credit information.Moreover, the syndication size of the leading Asian banks is smaller than that of the Western banks. This market behavior is not generally expected. Meanwhile, Western banks sell loans to a relatively large number of participants because their loans are oriented to borrowers with more credit information. The key to explaining these differences in supply behavior is that the Western banks focus on deals that are in favor of transaction lending, and the Asian banks prefer a lending relationship based on long-term associations and comprehensive business. This lending relationship explains why the activities of Asian banks differ from what is generally expected.Another aspect of this analysis implies a stratified structure in the Asian market. The divided market structure might enable Asian banks to assume a position comparable to that of Western banks.