Information Spillover through Private Lender Reports

42 Pages Posted: 1 Jan 2020

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Tim Kooijmans

Monash University

Chris Veld

Monash University

Date Written: December 15, 2019

Abstract

This paper examines private information spillover from the lending market to markets for public securities. We find that information from private monthly reports to institutional lenders gradually spills over to the public equity market. We observe positive abnormal stock returns after firms provide favorable private reports. After unfavorable private reports, we find negative abnormal returns, as well as increased short interest. This private information leakage is striking and previously undocumented. We demonstrate how traders benefit from private information, as we show that they do not trade immediately upon receiving the private information. Instead, they time their trades to manage both the price impact and the risk of additional information arrival before the scheduled public release of their private information.

Keywords: Private information, Covenants, Information spillover, Private debt

JEL Classification: M41, G32

Suggested Citation

de Jong, Abe and Kooijmans, Tim and Veld, Chris, Information Spillover through Private Lender Reports (December 15, 2019). Available at SSRN: https://ssrn.com/abstract=3504125 or http://dx.doi.org/10.2139/ssrn.3504125

Abe De Jong (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-25
Rotterdam, 3000 DR
Netherlands
+31 10 408 1022 (Phone)

HOME PAGE: http://https://www.rsm.nl/people/abe-de-jong/

Monash University ( email )

900 Dandenong Rd
Room H3-56
Caulfield East, Victoria 3145
Australia

HOME PAGE: http://https://research.monash.edu/en/persons/abe-de-jong

Tim Kooijmans

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Chris Veld

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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