The systemic risk of leveraged and covenant-lite loan syndications

[thumbnail of Open Access]
Preview
Text (Open Access) - Published Version
· Available under License Creative Commons Attribution.
· Please see our End User Agreement before downloading.
| Preview
Available under license: Creative Commons Attribution
[thumbnail of Leveraged loans and systemic risk - Centaur.pdf]
Text - Accepted Version
· Restricted to Repository staff only
Restricted to Repository staff only

Please see our End User Agreement.

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email

Sina, A., Billio, M., Dufour, A. orcid id iconORCID: https://orcid.org/0000-0003-0519-648X, Rocciolo, F. and Varotto, S. orcid id iconORCID: https://orcid.org/0000-0001-5328-5327 (2025) The systemic risk of leveraged and covenant-lite loan syndications. International Review of Financial Analysis, 97. 103738. ISSN 1873-8079 doi: 10.1016/j.irfa.2024.103738

Abstract/Summary

By modelling the whole U.S. syndicated loan market as a financial network from 2000 to 2022, we find that highly connected institutions hold significant shares of leveraged and covenant-lite loans. Our analysis indicates that the size of leveraged and covenant- lite syndicated loan portfolios increases financial institutions’ systemic risk, particularly during recession periods. Although banks commonly sell syndicated loans shortly after origination, our results suggest that they remain vulnerable to pipeline risk. Our study has significant implications for policymakers and regulators, as it can aid in identifying banks exposed to systemic risk associated with leveraged and covenant-lite loans and in ranking systemically important financial institutions accordingly.

Altmetric Badge

Item Type Article
URI https://reading-clone.eprints-hosting.org/id/eprint/119233
Identification Number/DOI 10.1016/j.irfa.2024.103738
Refereed Yes
Divisions Henley Business School > Finance and Accounting
Uncontrolled Keywords Leveraged loans, covenant-lite loans, loan syndication, systemic risk, financial networks.
Publisher Elsevier
Download/View statistics View download statistics for this item

Downloads

Downloads per month over past year

University Staff: Request a correction | Centaur Editors: Update this record

Search Google Scholar