Reexamination of Market Reactions to U.S. Corporate Loan Announcements
Date Issued
2004
Date
2004
Author(s)
Hung, Ruo-Wei
DOI
en-US
Abstract
Previous empirical studies employ the event study methodology to examine the market reactions to loan announcements, and document that the loan announcement produces positive abnormal returns for the borrowing firm, in contrast to the strong negative or non-positive announcement effects of public security offering. Banks provide valuable monitoring, screening and certification services for borrowing firms, thus, enhancing the borrowing firm’s value by reducing information asymmetries.
There are no recent studies of whether growing changes in corporate loan activities and nature of bank intermediation influence loan origination and monitoring functions, and as a result, changing market reactions to loan announcements. While considerable empirical literature on loan announcement effects using samples that included the early 1990s or prior to the 1990s, little empirical research using data after 1990s has been undertaken.
In this paper we address this issue by analyzing whether stock-market reactions of borrowing firms to loan announcements are still related to the characteristics of loan agreements in the 2001-2003 period. We find that there are no statistically significant abnormal returns for loan announcements over the period 2001 to 2003.Our empirical results provide preliminary evidence that loan announcements have no significant effects on abnormal returns for announcing firms. The results are not consistent with the prior empirical studies.
Subjects
超額報酬
借款宣告
Abnormal returns
Loan announcements
Type
other
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