Bank Borrowers and Loan Sales: New Evidence on the Uniqueness of Bank Loans*
Year: 2003
Type: article
Abstract: This paper examines the information content of the announcement of a sale of a borrower's loans by its lending bank. We find significant negative stock returns for the borrower on the loan sale announcement, particularly for sub-par loan sales, where the bank's information advantage is greatest. Further, a large proportion of these borrowers file for bankruptcy after the loan sale. The evidence supports the hypothesis that news of a bank loan sale conveys negative certification, validated by the subsequent performance of the firms whose loans are sold. We also find that selling banks are not significantly impacted.
Source: The Journal of Business
DOI: 10.1086/377031
Authors: Sandeep Dahiya, Manju Puri, Anthony Saunders
Institutions: Stanford University, New York University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2742092787