Title: The Effect of Lender Identity on a Borrowing Firm's Equity Return
Abstract: The Journal of FinanceVolume 50, Issue 2 p. 699-718 Shorter Paper The Effect of Lender Identity on a Borrowing Firm's Equity Return MATTHEW T. BILLETT, MATTHEW T. BILLETTSearch for more papers by this authorMARK J. FLANNERY, MARK J. FLANNERYSearch for more papers by this authorJON A. GARFINKEL, JON A. GARFINKEL Billett is from the Federal Deposit Insurance Corporation, Washington, D.C. Flannery is from the University of Florida, Garfinkel is from Loyola University, Chicago. We would like to thank the following people for helpful comments on earlier drafts: George Benston, Dave Brown, Susan Chaplinsky, Allaudeen Hameed, Rob Hansen, Joel Houston, Cris James, Simon Kwan, Jim Wansley, the referee, the editor (René Stulz), and seminar participants at the Universities of Arizona, British Columbia, and Calgary, the Virginia Polytechnic Institute, Florida State University, the Federal Reserve Board, and Concordia University. Mr Jerome Fons of Moody's Investor Services generously provided the data on lender credit ratings. We are responsible for any remaining errors. This work was largely completed while Matthew Billett and Jon Garfinkel were at the University of Florida. The analysis and conclusions of this article are those of the authors and do not indicate compliance with the views of the FDIC.Search for more papers by this author MATTHEW T. BILLETT, MATTHEW T. BILLETTSearch for more papers by this authorMARK J. FLANNERY, MARK J. FLANNERYSearch for more papers by this authorJON A. GARFINKEL, JON A. GARFINKEL Billett is from the Federal Deposit Insurance Corporation, Washington, D.C. Flannery is from the University of Florida, Garfinkel is from Loyola University, Chicago. We would like to thank the following people for helpful comments on earlier drafts: George Benston, Dave Brown, Susan Chaplinsky, Allaudeen Hameed, Rob Hansen, Joel Houston, Cris James, Simon Kwan, Jim Wansley, the referee, the editor (René Stulz), and seminar participants at the Universities of Arizona, British Columbia, and Calgary, the Virginia Polytechnic Institute, Florida State University, the Federal Reserve Board, and Concordia University. Mr Jerome Fons of Moody's Investor Services generously provided the data on lender credit ratings. We are responsible for any remaining errors. This work was largely completed while Matthew Billett and Jon Garfinkel were at the University of Florida. The analysis and conclusions of this article are those of the authors and do not indicate compliance with the views of the FDIC.Search for more papers by this author First published: June 1995 https://doi.org/10.1111/j.1540-6261.1995.tb04801.xCitations: 293 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT Previous research demonstrates that a firm's common stock price tends to fall when it issues new public securities. By contrast, commercial bank loans elicit significantly positive borrower returns. This article investigates whether the lender's identity influences the market's reaction to a loan announcement. Although we find no significant difference between the market's response to bank and nonbank loans, we do find that lenders with a higher credit rating are associated with larger abnormal borrower returns. This evidence complements earlier findings that an auditor's or investment banker's perceived "quality" signals valuable information about firm value to uninformed market investors. REFERENCES Beatty, Randolph P., 1989, Auditor reputation and the pricing of initial public offerings, The Accounting Review 64, 693–709. Beatty, Randolph P., and Jay R. Ritter, 1986, Investment banking, reputation, and the underpricing of initial public offerings, Journal of Financial Economics 15, 213–232. Best, Ronald, and Hang Zhang, 1993, Alternative information sources and the information content of bank loans, Journal of Finance 4, 1507–1523. 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Citing Literature Volume50, Issue2June 1995Pages 699-718 ReferencesRelatedInformation
Publication Year: 1995
Publication Date: 1995-06-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 140
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