Firm size and the information content of bank loan announcements

Slovin, Myron B.; Johnson, Shane A.; Glascock, John L.

doi:10.1016/0378-4266(92)90059-9

Cited by 168 publications

(114 citation statements)

References 21 publications

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“…Banks would put more monitoring and investigating efforts on the borrower if the financial indicator of the borrower noisy and unclear. This result is consistent with the Slovin et al's (1992) finding. Slovin et al (1992) discussed whether the share price responses to bank loan announcements differ between small firms and large firms.…”

Section: Role Of Bank Loanssupporting

confidence: 93%

“…This result is consistent with the Slovin et al's (1992) finding. Slovin et al (1992) discussed whether the share price responses to bank loan announcements differ between small firms and large firms. Since small firms have a relatively short history, less reputation and the problem of moral hazard, therefore adverse selection for small firms is more significant.…”

Section: Role Of Bank Loanssupporting

confidence: 93%

“…Since small firms have a relatively short history, less reputation and the problem of moral hazard, therefore adverse selection for small firms is more significant. Slovin et al (1992) suggested banks should investigate more on small firms for monitoring and evaluating. On the other hand, large firms are considered to be well monitored and have good reputations, therefore the banks have relatively less comparative advantage on evaluating and monitoring financial decisions of large firms.…”

Section: Role Of Bank Loansmentioning

confidence: 99%

“…Slovin et al (1992) The authors explained that larger firms face less moral hazard and adverse selection problems, therefore bank lending burden less information processing and monitoring.…”

Section: Firm Sizementioning

confidence: 99%

“…Several studies have also examined how the factors, such as borrower characteristics, lender characteristics, and loan characteristics could influence the market reaction to loan announcements (Lummer and McConnell, 1989;Preece and Mullineaux, 1996;Slovin, Johnson, and Glascock, 1992). In addition, the information content of bank loan announcements is also generated under different banking systems compared to most of the studies in the U.S., Canada, and the U.K.…”

Section: Introductionmentioning

confidence: 99%

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An empirical analysis of the effects of market response to bank loan announcements in Hong Kong stock market

Qing¹,

Gan

Li³

2011

J Bank Regul

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of a thesis submitted in partial fulfillment of the requirements for the Degree of M.C.M An Empirical Analysis of the Effects of Market Response to Bank Loan Announcements in the Hong Kong Stock Market Qing ChenThis study will validate several key results from previous studies of bank loan announcement effects by using the data from Hong Kong market following the 1997 Asian crisis. Banks are believed to play a unique role in financial market which could effectively reduce the problem of information asymmetry and moral hazard. Banks could access borrowers' inside information which is not available to other participants.Thus bank loan announcements convey valuable information to the market, and market response of the stock price should be positive. However, because of the significant reform in both financial market and information market, the valuation of bank loan announcement conveyed need to be reconsidered. This study investigates whether banks are still "unique" in the financial market or whether they are like middlemen between borrowers and investors. Data used in this study is collected from the Hong Kong Stock Exchange Index, and a standard event study with the market model is applied in the research to conduct the empirical analysis.The results suggest bank loan announcements are associated with significantly higher positive abnormal returns than non-bank loan announcements. Based on the market model of event study, market response is found to be significantly positive for loan syndication, short maturity loan and borrower's debt ratio, and negatively related to II firm size and loan size. Bank loans with refinancing and capital expenditure and no specific purpose have significantly higher positive abnormal returns, and borrowers with property and industrial industry type have more significant positive abnormal returns compared to other industry type. The findings also suggest the Hong Kong stock market is efficient in both strong and semi-strong form for bank loan announcements. A strong evidence of information leakage problem is found for nonbank loan announcements. The results are generally consistent with the existing literature.Key Words: bank loan announcements, abnormal returns, information asymmetry, syndication, loan size, loan maturity, loan purpose, firm size, industry type, debt ratio, market efficiency. III ACKNOWLEDGEMENTS

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Section: Role Of Bank Loanssupporting

confidence: 93%

Section: Role Of Bank Loanssupporting

confidence: 93%

Section: Role Of Bank Loansmentioning

confidence: 99%

Section: Firm Sizementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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An empirical analysis of the effects of market response to bank loan announcements in Hong Kong stock market

Qing¹,

Gan

Li³

2011

J Bank Regul

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The Roles of Financial Intermediaries in Raising Capital

Galpin

Park

2011

Capital Structure and Corporate Financing Decisions

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The valuation effects of bank loan ratings in the presence of multiple monitors

2006

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Studies have shown that when two information providers or outside auditors exist, the value provided by the second one will be decreased by the actions of the first.Capitalizing on the highly similar functions performed by banks and rating agencies, this paper examines the informational value of the credit ratings of bank loans. Further, it provides evidence on whether rating agencies duplicate the certifying and monitoring roles played by banks. The significant market reaction to negative credit rating announcements found suggests that these rating actions convey information to the capital market beyond that provided via the bank loan approval and renewal process.

show abstract

Firm size and the information content of bank loan announcements

Cited by 168 publications

References 21 publications

An empirical analysis of the effects of market response to bank loan announcements in Hong Kong stock market

An empirical analysis of the effects of market response to bank loan announcements in Hong Kong stock market

The Roles of Financial Intermediaries in Raising Capital

The valuation effects of bank loan ratings in the presence of multiple monitors

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