Arranger Certification in Project Finance


  • Stefano Gatti,

  • Stefanie Kleimeier,

  • William Megginson,

  • Alessandro Steffanoni

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    • Stefano Gatti is the Director of BSc in Economics and Finance at Bocconi University in Milan, Italy. Stefanie Kleimeier is an Associate Professor of Finance in the School of Business and Economics at Maastricht University in Maastricht, The Netherlands. William L. Megginson is a Professor in the Price College of Business at The University of Oklahoma in Norman, OK. Alessandro Steffanoni is the Head of Project Finance at Meliorbanca Spa, Corporate Division, in Milano, Italy.

  • We thank Ginka Borisova, Veljko Fotak, Lucia Di Croce, and Alberto Sosso for research assistance with this project. We also benefited from comments offered by Bill Christie (Editor), Mark Carey, Ian Cooper, Mansoor Dailami, Tiago Duarte-Silva, Louis Ederington, Antonio Estache, Chitru Fernando, Emilia Garcia-Appendini, Blaise Gadanecz, Paul Grout, Issam Hallak, Robert Hauswald, Christa Hainz, Nadia Massoud, Raphael Markellos, Rajesh Narayanan, Giovanna Nicodano, Dayanand Pandey, Alberto Pozzolo, Andrea Resti, Francesco Saita, Caroline Schmidt, Andrea Sironi, Marco Sorge, Javier Suarez, Krishnamurthy Subramanian, Florin Vasvari, Ania Zalewska, Allen Zebedee, two anonymous referees and, especially, Ben Esty. We also thank participants in the XV International ‘Tor Vergata’ Conference on Banking and Finance (Rome), the 2006 Centre for Market and Public Organisation Workshop on Privatisation and Partnership, the 2007 Institute of Financial Markets and Intermediaries Research Seminars at Bocconi University, the 5th International Business Research Conference in Dubai, the 2007 INFINITI Conference in Dublin, the EFMA 2007 Annual Conference in Wien, the FMA 2007 Annual Conference in Orlando, the 2007 Australasian Finance and Banking Conference in Sydney, the EFA 2008 Annual Conference in Athens, the FMA 2010 Annual European Conference in Hamburg, and seminar participants at the University of Bristol, the Hong Kong University of Science and Technology, the University of Bath, the University of New Orleans, Erasmus University, the Manchester Business School, the Helsinki School of Economics, the École Supérieure des Sciences Économiques et Commerciales [ESSEC], the Université Paris Dauphine, and the “Financial Intermediaries and Markets at the Cross Roads” workshop at the University of Amsterdam (September 2008). This manuscript was revised while Bill Megginson was the Fulbright Tocqueville Distinguished Chair in American Studies at the Université Paris-Dauphine. The financial support of the Fulbright Commission is gratefully acknowledged.


Using a sample of 4,122 project finance loans worth $769 billion arranged from 1991 to 2005, we demonstrate that certification by prestigious lead arranging banks creates economic value by reducing overall loan spreads compared to loans arranged by less prestigious arrangers. Banks participating in these loan syndicates, rather than the project sponsors, pay for this certification. They do so by allowing top tier arrangers to keep larger fractions of the upfront arranging fees. Results are robust to the correction for the endogenous choice of loans by prestigious arrangers and indicate that certification is even more valuable during periods of extreme financial stress.