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Did Regulation Fair Disclosure affect credit markets?

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  • Li, Yutao
  • Saunders, Anthony
  • Shao, Pei

Abstract

This study assesses whether the implementation of Regulation Fair Disclosure (Reg FD) has affected the quantity and quality of information in credit markets. We find that, after Reg FD, borrowing from new lenders was associated with a higher loan spread. We also document that, after Reg FD, (1) borrowers became more dependent on relationship lending; (2) lead lenders retained a higher loan share; and (3) a typical loan syndicate involved a smaller number of participating lenders. We interpret these results as evidence of an increased level of information asymmetry in credit markets after Reg FD.

Suggested Citation

  • Li, Yutao & Saunders, Anthony & Shao, Pei, 2015. "Did Regulation Fair Disclosure affect credit markets?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 46-59.
  • Handle: RePEc:eee:jbfina:v:54:y:2015:i:c:p:46-59
    DOI: 10.1016/j.jbankfin.2015.01.001
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    References listed on IDEAS

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    Cited by:

    1. Yu, Susana & Webb, Gwendolyn, 2017. "Market adaptation to Regulation Fair Disclosure: The use of industry information to enhance the informational environment," Journal of Economics and Business, Elsevier, vol. 89(C), pages 1-12.

    More about this item

    Keywords

    Regulation Fair Disclosure; Information asymmetry; Syndicated loan market; Relationship banking; Cost of debt; Loan syndication structure;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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