We formulate and test hypotheses about how lead banks of syndicated loans use private information about loan quality, the Signaling and Sophisticated Syndicate Hypotheses. We measure private information using Shared National Credit (SNC) internal loan ratings made comparable using concordance tables. As outcomes, we use proportions of loans retained by lead banks from SNC and rate spreads on the loans from DealScan. We find favorable private information is associated with higher retention and lower spreads for pure term loans, supporting the Signaling Hypothesis. Only lower spreads occur for pure revolvers, likely because their syndicates more often include large sophisticated banks.

Despite the growth of Islamic banks (IBs), little is known about their liquidity creation performance and financial stability consequences relative to conventional banks (CBs). We address these issues using data from 24 countries over 2000–2014. We find IBs create more liquidity per unit of assets than CBs, primarily on the asset side of the balance sheet. Results are economically significant, econometrically robust, hold in high- and low-income countries, and during the Global Financial Crisis and other times. In addition, CB liquidity creation results in reduced national financial stability, particularly in high-income countries, whereas IB liquidity creation does not.

We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find that cost efficiency during normal times helps reduce bank failure probabilities, decrease risk, and enhance profitability during subsequent financial crises, while profit efficiency has limited benefits. Results suggest that cost efficiency better measures management quality, while profit efficiency may partially reflect temporary high returns from risky investments during normal times. Findings have policy implications and imply that improving bank cost efficiency during normal times may promote better financial crisis performance.