The rise of co-arranged lending

This paper documents an increase in co-arranged loans in private loan markets, where multiple lead arrangers jointly participate in a loan contract. We show that lenders co-arrange loans for high-quality borrowers (large, highly profitable, and with strong credit ratings), indicating a strategic response to increased credit market competition. Using the Gramm–Leach–Bliley Act as a natural experiment, we find that the regulatory change, which encouraged lending competition by allowing greater involvement from nonbank institutions, significantly increases the likelihood of co-arrange loan issuance. We also find that co-arranged loans carry higher interest rates. Overall, our findings suggest that credit market competition shapes debt ownership structures and raises financing costs for borrowers.