Market Response to Syndicated Loan Announcements During the Global Financial Crisis: Failed vs. Acquiring Banks

37 Pages Posted: 30 Jul 2018

See all articles by Dominic Gasbarro

Dominic Gasbarro

Murdoch University

Kim-Song Le

Murdoch University

Robert Schwebach

Colorado State University

J. Kenton Zumwalt

Colorado State University, Fort Collins - Department of Finance & Real Estate

Date Written: July 28, 2018

Abstract

We evaluate and compare market reaction to syndicated loan announcements for two sets of high-profile banks, consisting of five banks that failed in 2008 during the financial crisis and the five banks that ultimately acquired them. Results show that loan announcements are viewed differently for the two sets of banks when partitioned on loan type, loan purpose and information asymmetry. In addition to event study analysis we analyze differences in loan attributes and borrower risk characteristics for the two groups. Additional evidence on the impact of the financial crisis is shown by comparing loan announcements for the acquiring banks during pre- versus post-crisis periods. Our findings highlight the importance of the role of the syndicate in supporting the borrowers of failed banks and the timeliness with which the government encouraged the mergers or sale.

Keywords: Syndicated Loans; Bank Loans; Financial Crisis; Bank Failures

JEL Classification: G01; G14; G28

Suggested Citation

Gasbarro, Dominic and Le, Kim-Song and Schwebach, Robert and Zumwalt, J. Kenton, Market Response to Syndicated Loan Announcements During the Global Financial Crisis: Failed vs. Acquiring Banks (July 28, 2018). 31st Australasian Finance and Banking Conference 2018, Available at SSRN: https://ssrn.com/abstract=3221832 or http://dx.doi.org/10.2139/ssrn.3221832

Dominic Gasbarro

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia

Kim-Song Le

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia
61893602362 (Phone)
61893105004 (Fax)

Robert Schwebach (Contact Author)

Colorado State University ( email )

Fort Collins, CO 80523
United States

J. Kenton Zumwalt

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States

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