A firm’s passage from borrowing from a single lender to using multiple lenders is often viewed as an inevitable progression in the life of a firm. While there is a strong element of truth in this view, it is also incomplete. The underlying economics of moving from one lender to many involves more than simply asking whether the firm’s revenues are large enough to cover the costs of adding more lenders or of acquiring a public debt rating. The U.S. syndicated loan market provides a useful laboratory for exploring the economics of multiple lenders. In this article, Mitchell Berlin discusses recent research on the syndicated loan market that has attempted to answer questions related to firms’ use of multiple lenders.

This article appeared in the Third Quarter 2007 edition of Business Review.

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