1. Legal risk is defined here as the extent to which creditors have legal rights and can rely on courts for the enforcement of contracts.
2. Selling loans without recourse implies syndicating a loan.
3. Nonrecourse loans have no or only limited support from sponsors.
4. Equal sharing is assumed based on the literature; see, for instance, Esty (2001). The author assumes equal commitment on the loan underwriting when estimating the fee distribution among lead and colead arrangers. Gatti et al. (2013) use the same assumption where no data on the composition of the syndicate are provided.
5. According to the World Bank, "Rule of law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence." http://info.worldbank.org/governance/wgi/pdf/rl.pdf.
6. Godlewski (2008) introduces the use of a nonperforming loan dummy variable (equal to 1 if a formal definition of nonperforming loan exists, 0 otherwise) to capture bank supervisory mechanisms. The author says, "These regulatory features should have a positive influence on syndicate size as they enhance transparency on participant banks' loan portfolios through supervisory discipline."
7. According to the World Bank, "Regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development." http://info.worldbank.org/governance/wgi/pdf/rq.pdf.
8. Godlewski (2008) constructs an interaction variable of minimum capital requirements and a dummy variable equal to 1, if the minimum regulatory capital ratio varies with bank credit risk to capture banking regulation.