Abstract

http://ssrn.com/abstract=972044
 
 

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Institutional Stock Trading on Loan Market Information


Victoria Ivashina


Harvard University; National Bureau of Economic Research (NBER)

Zheng Sun


University of California, Irvine - Paul Merage School of Business

February 3, 2010

AFA 2008 New Orleans Meetings Paper
EFA 2007 Ljubljana Meetings

Abstract:     
One of the most important developments in the corporate loan market over the past decade has been the growing participation of institutional investors. As lenders, institutional investors routinely receive private information about borrowers. However, most of these investors also trade in public securities. This leads to a controversial question: Do institutional investors use private information acquired in the loan market to trade in public securities? This paper examines the stock trading of institutional investors whose portfolios also hold loans. Using SEC filings of loan amendments, we identify institutional investors with access to private information disclosed during loan amendments. We then look at abnormal returns on subsequent stock trades. We find that institutional participants in loan renegotiations subsequently trade in the stock of the same company and outperform trades by other managers and trades in other stocks by approximately 5.4% in annualized terms.

Number of Pages in PDF File: 55

Keywords: Institutional investors, Syndicated loans, Insider trading

JEL Classification: G11, G14, G21, G22, G23

working papers series





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Date posted: December 18, 2007 ; Last revised: February 20, 2010

Suggested Citation

Ivashina, Victoria and Sun, Zheng, Institutional Stock Trading on Loan Market Information (February 3, 2010). AFA 2008 New Orleans Meetings Paper; EFA 2007 Ljubljana Meetings. Available at SSRN: http://ssrn.com/abstract=972044 or http://dx.doi.org/10.2139/ssrn.972044

Contact Information

Victoria Ivashina (Contact Author)
Harvard University ( email )
Harvard Business School
Baker Library 233
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Zheng Sun
University of California, Irvine - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
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