Empirical Model

We are interested in two questions on loan syndications for project finance for PPP projects in Asia. What influences the extent of loan syndication on project finance? And what influences the likelihood of loan syndication on project finance? To answer these questions, we estimate our empirical model that takes the following form:

Loan Syndicate = + β₁ Legal Risk + β₂Information Asymmetry + β₃X + β₄Z + ε.

Loan syndicate is either debt concentration or the loan syndicate dummy variable. Legal risk is proxied by the rule of law variable. Information asymmetry is proxied by Standard & Poor's credit rating variable. X is the set of bank-specific characteristics, such as the tier 1 ratio, liquidity, the cost- to-income ratio, the bank regulation variable, and nonperforming loans. Z is the set of loan characteristics, which include loan maturity and tranche size; the loan security dummy variable is equal to 1 if the loan is accompanied by collateral, 0 otherwise. Macroeconomic variables are used to determine the likelihood of loan syndication in a separate regression analysis.