Sandeep Dahiya (Georgetown University) Manju Puri (Duke University and National Bureau of Economic Research) Anthony Saunders (New York University)
Abstract
This article examines the information content of the sale announcement 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 subpar 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 the news of a bank loan sale conveys negative certification, which is validated by the subsequent performance of the firms whose loans are sold. We also find that the selling banks are not significantly affected.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 76 (2003) Issue (Month): 4 (October) Pages: 563-582 Download reference. The following formats are available: HTML
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