Bank Loan Certification and Non-Bank Debt: Evidence from Large Ipos

Posted: 11 Feb 1997

See all articles by Richard B. Carter

Richard B. Carter

Iowa State University

Roger D. Stover

Iowa State University - Department of Accounting and Finance

Keith M. Howe

DePaul University - Department of Finance

Date Written: Undated

Abstract

Previous research concludes that companies with an established bank borrowing relationship receive certification benefits. Evidence from initial public offerings (IPOs) suggests that certification signals low risk and results in less run-up in price after the offering than firms with no certification. However, recent research implies that firms also receive risk revealing benefits from nonbank debt. In this paper, we focus on larger IPOs to increase the likelihood of nonbank debt in the capital structure. We find that an existing banking relationship, in itself, does not significantly explain after-market price run-up. Our results suggest that whatever bank certification benefits do exist must be considered in the context of broader debt structure decisions.

JEL Classification: G20

Suggested Citation

Carter, Richard B. and Stover, Roger D. and Howe, Keith M., Bank Loan Certification and Non-Bank Debt: Evidence from Large Ipos (Undated). Available at SSRN: https://ssrn.com/abstract=8096

Richard B. Carter (Contact Author)

Iowa State University ( email )

Carver Hall
Ames, IA 50011-2063
United States
515-294-9438 (Phone)
515-294-3525 (Fax)

Roger D. Stover

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States
515-294-8114 (Phone)

Keith M. Howe

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
312-362-5126 (Phone)

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