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Do Bank Loan Relationships Still Matter?

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  • Fields, L. Paige
  • Fraser, Donald R.
  • Berry, Tammy L.
  • Byers, Steven
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    Abstract

    James (1987) and Lummer and McConnell (1989) find that during the 1970s and 1980s the market responded positively to announcements of bank lending agreements. However, many of the advantages associated with bank lending relationships have largely disappeared since the 1980s due to financial system changes and greater availability of and less costly financial information. We find that bank loan announcements produced positive abnormal returns in the 1980s, but by the latter part of our sample period those announcement returns disappear entirely. We do find that bank loan relationships may still be valuable to smaller, poorer performing firms or during periods of high credit risk spreads.

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    File URL: http://dx.doi.org/10.1353/mcb.2006.0071
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    Bibliographic Info

    Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

    Volume (Year): 38 (2006)
    Issue (Month): 5 (August)
    Pages: 1195-1209

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    Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:5:p:1195-1209

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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    Cited by:
    1. Kwang-Won Lee & Ian Sharpe, 2009. "Does a Bank’s Loan Screening and Monitoring Matter?," Journal of Financial Services Research, Springer, vol. 35(1), pages 33-52, February.
    2. Godlewski, Christophe J., 2014. "Bank loans and borrower value during the global financial crisis: Empirical evidence from France," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 100-130.
    3. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8354 edited by Etner, François, September.
    4. Wei-Huei Hsu & Abdullah Mamun & Lawrence C. Rose, 2010. "Lead bank quality and adverse rating announcements," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(4), pages 340-357, October.
    5. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/10919 edited by Etner, François, September.
    6. Byers, Steven S. & Fields, L. Paige & Fraser, Donald R., 2008. "Are corporate governance and bank monitoring substitutes: Evidence from the perceived value of bank loans," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 475-483, September.
    7. Liu, Yong-Chin & Chen, Hsiang-Ju, 2012. "Economic conditions, lending competition, and evaluation effect of credit line announcements on borrowers," Pacific-Basin Finance Journal, Elsevier, vol. 20(3), pages 438-458.
    8. Huang, Weihua & Schwienbacher, Armin & Zhao, Shan, 2012. "When bank loans are bad news: Evidence from market reactions to loan announcements under the risk of expropriation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 233-252.
    9. Matej Marinč, 2009. "Bank Monitoring and Role of Diversification," Transition Studies Review, Springer, vol. 16(1), pages 77-91, May.

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