Three essays in finance

There are three individual chapters in this dissertation. The first chapter studies the effect of monitoring by the lenders of a syndicated loan on the borrowing firm's ex post performance. In the syndicated loan market, the lead bank has an advantage on information collection. For that reason, participant lenders of the syndicate demand the lead bank to hold a larger share of the loan or form a concentrated syndicate structure in order to increase monitoring efforts by the lead bank or collectively by the lenders. As a result, the share held by the lead bank or the concentrated syndicate structure is used as a proxy for monitoring efforts in the literature. Also, it is commonly accepted that the monitoring by the lead bank or the syndicate members has a positive effect on the borrowing firm. Thus, we empirically test whether or not the monitoring has a positive effect on the borrowing firm's performance. We use instruments—including deregulation, lender's reputation and lender's influence variables—to run two-stage least-squares regressions since the monitoring proxies have the endogeneity problem. Our regression results confirm that the literature's assumption is valid since we find that a higher level of monitoring leads to a higher level of firm performance ex post.;The second chapter examines the effects of borrowing firms' financial opacity on the structuring of financial instruments used by the firm, focusing on the decision whether to use a syndicated loan or a single-lender loan. Previous work had found that borrowers' reputations, lead banks' reputations and the informational advantage of the lead bank decreased the percentage of a syndicated loan that the lead bank would hold, and that the opacity of the borrowing firm would reinforce this effect. This chapter extends that work to include the effect of opacity on the choice between making a single-lender loan and a syndicated loan. Contrary to the previous work, I find that opacity increases the probability a loan is syndicated and has little effect on the share of a syndicated loan that the lead bank holds. Also, when the borrower is opaque and the lead bank who was a former lead bank of the borrower, the share held by the lead bank decreases. Overall, this results suggest that risk-sharing and diversification are more important to lenders than asymmetric information.;The third chapter investigates the extensive literature of syndicated loans. Syndicated loans have grown in popularity since the 1980's as the dominant financial instruments for corporations to get funding from various financial institutions. There have been many studies regarding these loans, and I explore them and summarize the findings in this paper. The main difference of syndicated loans from traditional single-lender loans is the extra layer of asymmetric information problems between the lead bank and the participant lenders of the loan. This asymmetric information affects the structure of the syndicate and also the pricing.