'Brexit' and the Contraction of Syndicated Lending

Using the syndicated loan market as a laboratory, we analyze the effect of the Brexit referendum on corporate loan origination. Issuances in the UK syndicated loan market dropped by 25% after the Brexit referendum relative to a set of comparable syndicated loan markets. We propose a new matching strategy – “Siamese Twins Matching” – to identify appropriate counterfactuals for the UK market. We further document a novel channel, market attractiveness, that plays an important role beyond standard demand and supply factors: firm-bank combinations that used to issue loans in both the UK market and other markets decrease their issuances in the UK market more than in other markets after the Brexit referendum. Our results help to understand the dynamics of competition between financial centers and the role of policy uncertainty shocks in this competition.

Steffen, Sascha, Tobias Berg, Anthony Saunders and Larissa Schäfer (2017), 'Brexit' and the Contraction of Syndicated Lending,