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

41 Pages Posted: 23 Jul 2002

See all articles by Sandeep Dahiya

Sandeep Dahiya

Georgetown University - Department of Finance

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

Anthony Saunders

New York University - Leonard N. Stern School of Business

Multiple version iconThere are 4 versions of this paper

Date Written: December 2001

Abstract

This paper examines the information content of the announcement of a sale 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 sub-par 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 news of a bank loan sale conveys negative certification, validated by the subsequent performance of the firms whose loans are sold. We also find that selling banks are not significantly impacted.

Keywords: loan sales, commercial banks

JEL Classification: G2, G3

Suggested Citation

Dahiya, Sandeep and Puri, Manju and Saunders, Anthony, Bank Borrowers and Loan Sales: New Evidence on the Uniqueness of Bank Loans (December 2001). Available at SSRN: https://ssrn.com/abstract=316705 or http://dx.doi.org/10.2139/ssrn.316705

Sandeep Dahiya

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3832 (Phone)

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
417
rank
17,944
Abstract Views
2,452
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information