This study explores the impact of cultural differences between lender and borrower on the structure of loan syndicate. Using a sample of 18,909 syndicated loan deals to 9,103 US firms signed between January 1986 and December 2010. We find that different nationality of the lead arranger from the borrower also acts as an information asymmetry and persuades the lead arrangers to retain higher share in the syndicate. These results still remain after controlling for information asymmetry effects. We

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... also show crisis does not significantly impact the syndicate structure and lead arrangers continue to form a concentrated syndicate. We finally distinguish between risk-sharing and risk-selling hypothesis and provide support to risk-selling hypothesis and conclude that lead arrangers tend to form diffused syndicate for culturally distant opaque borrowers and sell lemons to participants because of greater information gathering issues. Different cultures provide different ways of seeing, thinking, and interpreting the world. Even the same words and signs have different meanings and importance in different cultures. Ting-Toomey (2006) describes three ways to cross-cultural communication problems. First is "cognitive constraint." This is the frame of reference or world views that provide a backdrop that all new information is compared to or inserted into. Second is "behavior constraint." Each culture has its own rules about proper behavior which affect verbal and nonverbal communication. Third factor is "emotional constraint." Different cultures regulate the display of emotion differently. Some cultures get very emotional when they are debating an issue. Since cultural differences exist at multiple levels across countries, we find different styles of dealing and writing a financial contract as natural. This leads us to have a closer look how the nationality does as hence the culture of the lead arranger impacts the structure of the loan syndicate. By using a sample of 18,909 syndicated loan deals to 9,103 US firms arranged by the US and foreign lead arrangers, signed between January 1986 to December 2010, we show that the different nationality between the countries of the lead arranger and of the borrower impact the structure of the syndicate and the lead arrangers tend to form concentrated syndicate. This holds true for the natural barriers like geographical distance and the non-common border and for the cultural barriers like cultural distance proposed by Inglehart and Welzel (2005) . We conclude that different nationality of the lead arranger from the borrower also acts as an information asymmetry and persuades the lead arrangers to retain higher share in the syndicate. We, indeed, control for the factors that determine the information asymmetry in the syndicated loan market, for example, opacity of the borrower, repeated borrowers, the reputation of the lead arrangers, and lead arranger-borrower relationship. We also show crisis does not significantly impact the syndicate structure and lead arrangers continue to form a concentrated syndicate. We finally support the risk-selling hypothesis and conclude that lead arrangers tend to hold less for culturally distant opaque borrowers and form diffused syndicated due to greater information gathering issues. The rest of the paper is organized as follows. Section 2 introduces the syndicated loan market and cultural aspects, section 3 elaborates on data and methodology and section 4 presents the results of our study. Finally, section 5 summarizes and concludes our study. Syndicated Loan Market and Cultural Aspects: The emerging of the syndicated loan market has benefitted both lenders and borrowers. Borrowers gain access to a larger amount of capital through a syndicated loan and attain flexibility in customizing the loan that is not otherwise possible with standard one-to-one loan. The syndication also administers lenders to diversify their loan portfolio and to share risk among several lenders. In a 4 syndicated loan deal the lead lender, commonly known as lead arranger, negotiates the terms and conditions of the loan contract and then invite other banks to participate in the loan, commonly called participant. The existence of natural and cultural barriers is a big hurdle for such negotiations between the lead arranger and the borrower. Simple geographical distance is a hurdle in order to access both the parties. Translations are required to effectively communicate in case of different language, which might create mis-understandings as different words are interpreted differently in different cultures. As explained above, there are cognitive, behavioral, and emotional constraints, which hinder effective communication among different cultures. As pointed out by Brett and Okumura (1998) ; and Adair et al (2001), sharing similar norms and codes facilitates communication and the exploration of alternatives. The best example can be showing the signs with hands. Thumb and index finger up means two in Europe, one in Britain, Australia, and New Zealand, Calling a waiter sign in the US and a sign of an insult in Japan. So, such signs can completely mislead the negotiations if representatives from different cultures are sitting and showing it. Senior people are given high status in Asian cultures and selected as negotiators, which might face problem while negotiating with young and energetic people as negotiators in Anglo-Saxon individualistic cultures. Similarly, individualistic and egalitarian cultures are direct and straightforward, which might strike a syndicated loan deal efficiently and effectively as compared to hierarchical ones, which requires the deal to pass through multiple layers before it gets approved. Similarly, other corporate policies towards gender equality, environment of transparency and openness, attitude toward rational values, and the level of trust also vary among different nationalities. These attribute are determining factor of negotiation and forming a financial contract.