Factors Affecting Syndicated Loan Spreads in Indonesia, Thailand, and Vietnam

Abstract

This study aims to analyze the effect of loan information (i.e., number of lenders, loan amount, and loan maturity) and borrower characteristics (i.e., public, firm size, leverage, and profitability), as well as control variables such as country and year on syndicated loan, spread in public companies and private companies in Indonesia, Thailand, and Vietnam during the 2008–2018 period by calculating the All In Spread Drawn (AISD) of the syndicated loans over LIBOR. This study applied a quantitative approach through the ordinary least squares method on a sample of 389 observations. A total of 118 observations came from public companies, and 271 observations came from private companies. This study shows that syndicated loans given to private companies are more expensive than public companies. However, this can be minimized by increasing the loan exposure for private firms through a larger number of lenders. It can also be seen that public companies with larger assets, higher returns on equity, and borrowing with shorter terms will be subject to lower interest rates. The spreads for syndicated loans are the most expensive in Indonesia, followed by Vietnam and Thailand.

Economic And Asymmetric Information As Moderation Variables, Credit Risk And Credit Prices

“…Furthermore, increased information asymmetry exposes primary regulators to higher credit risk, leading businesses to expect higher-priced credit. Commercial banks can reduce asymmetric information better than investment banks, resulting in more affordable credit pricing decisions (Bryan et al, 2022). Credit risk refers to the risk of the borrower's inability to fulfil their obligations as stated in the credit agreement (Chowdhury, 2021), which can include bankruptcy or late payment of credit interest.…”

“…Previous research by Bryan et al (2022) shows that asymmetric information is insignificant in loan pricing. However, research by Maleki Mehr (2020) and Thai et al (2021) demonstrates that asymmetric information and earnings management significantly affect firm value.…”