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Capital market reactions to project finance loans

Author

Listed:
  • Kammoun, Manel
  • Power, Gabriel J.
  • Tandja M, Djerry C.

Abstract

Theory predicts that bank loan announcements could increase share prices of loan recipients through a certification effect. We provide complementary evidence using the novel market setting of project finance loans. Since the loans are off-balance-sheet, there should be no certification effect. Applying an event study methodology and the Carhart 4-factor model to a large international dataset, we find that project sponsors do not experience positive abnormal returns after announcements, but lenders do. We also find that sponsors and lenders tend to experience greater equity return volatility after announcements.

Suggested Citation

  • Kammoun, Manel & Power, Gabriel J. & Tandja M, Djerry C., 2022. "Capital market reactions to project finance loans," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321001963
    DOI: 10.1016/j.frl.2021.102115
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    References listed on IDEAS

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    Cited by:

    1. Rémi Pierre Viné & Astrit Sulstarova & Bruno Casella & Claudia Trentini, . "International project finance deals as indicators of productive cross-border investment: UNCTAD’s approach," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    Keywords

    Syndicated loans; Project finance loans; Announcements; Certification; Carhart model; Volatility;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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