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Bank Borrowers and Loan Sales: New Evidence on the Uniqueness of Bank Loans

Sandeep Dahiya, Manju Puri and Anthony Saunders
The Journal of Business
Vol. 76, No. 4 (October 2003), pp. 563-582
DOI: 10.1086/377031
Stable URL: http://www.jstor.org/stable/10.1086/377031
Page Count: 20
Subjects: Finance Business
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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.

Notes and References

This item contains 20 references.

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