Loan Sales and Bank Liquidity Management: Evidence from a U.S. Credit Register

Rustom M. Irani, Ralf R. Meisenzahl

Research output: Contribution to journalArticle

Abstract

We examine how banks use loan sales to manage liquidity during periods of marketwide stress and the associated spillovers to market prices. We track the dynamics of loan share ownership in the secondary market using data from a U.S. supervisory register of syndicated loans. Controlling for loan quality using loan-year fixed effects, we find that banks reliant on wholesale funding were more likely to exit syndicates through sales during 2007/08. This effect is stronger for banks dependent on short-term funding and holding fewer liquid securities. In addition, secondary market prices decrease significantly more for loans funded by liquidity-strained banks.

Original languageEnglish (US)
Pages (from-to)3455-3501
Number of pages47
JournalReview of Financial Studies
Volume30
Issue number10
DOIs
StatePublished - Oct 1 2017

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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