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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

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.

Suggested Citation

  • Fields, L. Paige & Fraser, Donald R. & Berry, Tammy L. & Byers, Steven, 2006. "Do Bank Loan Relationships Still Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1195-1209, August.
  • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:5:p:1195-1209
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    Citations

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    Cited by:

    1. Mascia Bedendo & Linus Siming, 2018. "The mitigating effect of bank financing on shareholder value and firm policies following rating downgrades," Post-Print hal-01636854, HAL.
    2. 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.
    3. Steven Ongena & Viorel Roscovan, 2013. "Bank Loan Announcements and Borrower Stock Returns: Does Bank Origin Matter?," International Review of Finance, International Review of Finance Ltd., vol. 13(2), pages 137-159, June.
    4. 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.
    5. repec:rom:mancon:v:11:y:2017:i:1:p:652-659 is not listed on IDEAS
    6. 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.
    7. 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.
    8. 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.
    9. Tumer-Alkan, G., 2008. "Essays on banking," Other publications TiSEM 8d5ec521-4702-4e75-bc79-a, Tilburg University, School of Economics and Management.
    10. Chi, Li-Chiu, 2009. "How have banks fared following a borrower's financial distress?," Economic Modelling, Elsevier, vol. 26(2), pages 480-488, March.
    11. 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.
    12. He, Qing & Lu, Liping & Ongena, Steven, 2015. "Who gains from credit granted between firms? Evidence from inter-corporate loan announcements made in China," BOFIT Discussion Papers 1/2015, Bank of Finland, Institute for Economies in Transition.
    13. Li, Chunshuo & Ongena, Steven, 2015. "Bank loan announcements and borrower stock returns before and during the recent financial crisis," Journal of Financial Stability, Elsevier, vol. 21(C), pages 1-12.
    14. Matej Marinč, 2009. "Bank Monitoring and Role of Diversification," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 77-91, May.
    15. Kwang-Won Lee & Ian Sharpe, 2009. "Does a Bank’s Loan Screening and Monitoring Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 35(1), pages 33-52, February.
    16. 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.

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