Reexamination of Market Reactions to U.S. Corporate Loan Announcements
Date Issued
2005
Date
2005
Author(s)
Yao, Wen-lan
DOI
en-US
Abstract
Many previous empirical studies show that bank loan announcements have positive market reactions, which support the theoretical view of banks’ unique types of financial intermediaries. Banks hold the cost advantage of information collection and production, and work as “delegated monitors”. Banks have the ability to screen and evaluate borrowers and to solve information asymmetries between borrowers and lenders, therefore creating value for the borrowing firms.
Recently, as the development of capital market and severe competition of financial services, some scholars have questioned that whether the information advantage of banks still exists under this changing environment. The most recent studies show empirical evidences that bank loan announcements generate no more significant positive abnormal returns
The purpose of this study is to investigate empirically the information contents of loan announcements using an event study methodology and the most recent sample period over 2000-2003. In our empirical tests, we find that there are no statistically significant abnormal returns for loan announcements in the 2000-2003 periods. Our results show stronger evidence that banks no longer offer abnormal benefits to the market. We also discover that if the purposes of the loan are working capital and general purposes, the market reactions are positively significant, which somewhat consists with prior literatures.
Subjects
借款宣告
超額報酬
Loan announcements
Abnormal returns
Type
other
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