Syndicated Loan Lender Disqualifications
By Richard Carrizosa, Yuyun (Robert) Zhou, Gurvinder Sandhu
Citation
Carrizosa, Richard., Zhou, Yuyun (Robert)., Sandhu, Gurvinder. (2025). Syndicated Loan Lender Disqualifications .
Copyright
2025
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Abstract
We examine lender disqualification provisions in syndicated loan contracts. These provisions prohibit lenders from assigning loans to entities on a disqualified lender list provided by borrowers during loan origination. We provide evidence that loan contracts are more likely to include lender disqualification provisions for: (1) borrowers that have greater investments and assets that are more informationally sensitive; (2) borrowers that operate in more concentrated industries; and (3) loans that include non-bank institutional lenders. These findings are consistent with lender disqualification provision inclusion in loan contracts to reduce proprietary costs and bargaining frictions that result from non-bank institutional lender participation in the primary and secondary loan market. We further show that loans with lender disqualification provisions include higher interest to compensate lenders and are associated with borrower favorable amendments.

Gurvinder Sandhu is an Assistant Professor of Accounting at the Indian School of Business (ISB). He holds a PhD in Management Science from the University of Texas at Dallas. He also holds an MBA from Melbourne Business School (University of Melbourne) and a B.Com from Kurukshetra University.

Professor Sandhu’s research explores financial institutions, credit markets, and firms’ voluntary disclosures. His empirical work looks at what forces shape banks’ loan portfolios. He has developed a bank diversification measure that captures how diversified banks are in their commercial loan portfolio.

His research has been accepted at various academic conferences, including the American Accounting Association and the European Accounting Association. His teaching interests lie in financial accounting, specifically financial statement analysis and introductory financial accounting.

Gurvinder Sandhu
Gurvinder Sandhu