Skip to main content
    • Aa
    • Aa
  • Get access
    Check if you have access via personal or institutional login
  • Cited by 35
  • Cited by
    This article has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Anagnostopoulou, Seraina C. Ferentinou, Aikaterini C. Tsaousis, Panagiotis A. and Tsekrekos, Andrianos E. 2016. The Options Market Reaction to Bank Loan Announcements. Journal of Financial Services Research,

    Lewis, Craig M. and Tan, Yongxian 2016. Debt-equity choices, R&D investment and market timing. Journal of Financial Economics, Vol. 119, Issue. 3, p. 599.

    Rahaman, Mohammad M 2016. Chinese import competition and the provisions for external debt financing in the US. Journal of International Business Studies,

    Cao, Sean Shun 2015. Reexamining Growth Effects: Are All Types of Asset Growth the Same?. Contemporary Accounting Research, p. n/a.

    Chiang, Gengnan 2015. Exploring the transitional behavior among value and growth stocks. Review of Quantitative Finance and Accounting,

    Cohen, Daniel Lys, Thomas and Zach, Tzachi 2015. The Handbook of Equity Market Anomalies.

    Polovina, Nereida and Peasnell, Ken 2015. The effect of foreign management and board membership on the performance of foreign acquired Turkish banks. International Journal of Managerial Finance, Vol. 11, Issue. 3, p. 359.

    Godlewski, Christophe J. 2014. Bank loans and borrower value during the global financial crisis: Empirical evidence from France. Journal of International Financial Markets, Institutions and Money, Vol. 28, p. 100.

    Huang, Yuan Lam, F.Y. Eric C. and Wei, K.C. John 2014. The q-theory explanation for the external financing effect: New evidence. Journal of Banking & Finance, Vol. 49, p. 69.

    Kamstra, M. J. Roberts, G. S. and Shao, P. 2014. Does the Secondary Loan Market Reduce Borrowing Costs?. Review of Finance, Vol. 18, Issue. 3, p. 1139.

    Lee, Charles M. C. 2014. Value Investing: Bridging Theory and Practice. China Accounting and Finance Review, Vol. 16, Issue. 2,

    Lee, Charles M.C. 2014. Performance measurement: an investor's perspective. Accounting and Business Research, Vol. 44, Issue. 4, p. 383.

    LEMMON, MICHAEL LIU, LAURA XIAOLEI MAO, MIKE QINGHAO and NINI, GREG 2014. Securitization and Capital Structure in Nonfinancial Firms: An Empirical Investigation. The Journal of Finance, Vol. 69, Issue. 4, p. 1787.

    Naifar, Nader 2014. Credit Default Sharing Instead of Credit Default Swaps: Toward a More Sustainable Financial System. Journal of Economic Issues, Vol. 48, Issue. 1, p. 1.

    GANDE, AMAR and SAUNDERS, ANTHONY 2012. Are Banks Still Special When There Is a Secondary Market for Loans?. The Journal of Finance, Vol. 67, Issue. 5, p. 1649.

    Huang, Weihua Schwienbacher, Armin and Zhao, Shan 2012. When bank loans are bad news: Evidence from market reactions to loan announcements under the risk of expropriation. Journal of International Financial Markets, Institutions and Money, Vol. 22, Issue. 2, p. 233.

    Billett, Matthew T. Flannery, Mark J. and Garfinkel, Jon A. 2011. Frequent issuers’ influence on long-run post-issuance returns. Journal of Financial Economics, Vol. 99, Issue. 2, p. 349.

    Butler, Alexander W. Cornaggia, Jess Grullon, Gustavo and Weston, James P. 2011. Corporate financing decisions, managerial market timing, and real investment. Journal of Financial Economics, Vol. 101, Issue. 3, p. 666.

    Godlewski, Christophe Fungáčová, Zuzana and Weill, Laurent 2011. Stock Market Reaction to Debt Financing Arrangements in Russia. Comparative Economic Studies, Vol. 53, Issue. 4, p. 679.

    Gottesman, Aron A. and Roberts, Gordon S. 2011. Capital Structure and Corporate Financing Decisions.

  • Journal of Financial and Quantitative Analysis, Volume 41, Issue 4
  • December 2006, pp. 733-751

Are Bank Loans Special? Evidence on the Post-Announcement Performance of Bank Borrowers

  • Matthew T. Billett (a1), Mark J. Flannery (a2) and Jon A. Garfinkel (a3)
  • DOI:
  • Published online: 01 April 2009

Unlike seasoned equity or public debt offerings, bank loan financing elicits a significantly positive announcement return, which has led financial economists to characterize bank loans as “special.” Here, we find that firms announcing bank loans suffer negative abnormal stock returns over the subsequent three years. In the long run, bank loans appear no different from seasoned equity offerings or public debt issues. Our evidence suggests that larger loans (relative to borrower equity) are followed by worse stock performance. We also find that lender protection is negatively related to borrower performance, suggesting the lender is somewhat shielded from the poor performance.

Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

P. Asquith , and D. Mullins JrEquity Issues and Offering Dilution.” Journal of Financial Economics, 15 (1986), 6189.

B. Barber , and J. Lyon . “Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics.” Journal of Financial Economics, 43 (1997), 341372.

M. Berlin , and J. Loeys . “Bond Covenants and Delegated Monitoring.” Journal of Finance, 43 (1988), 397412.

V. L. Bernard , and J. K. Thomas . “Post-Earnings Announcement Drift-Delayed Price Response or Risk Premium?Journal of Accounting Research, 27 (1989), 136.

M. Billett ; M. Flannery ; and J. Garfinkel . “The Effect of Lender Identity on a Borrowing Firm's Equity Return.” Journal of Finance, 50 (1995), 699718.

A. Boot Relationship Banking: What DoWe Know?Journal of Financial Intermediation, 9 (2000), 725.

N. Dierkens Information Asymmetry and Equity Issues.” Journal of Financial and Quantitative Analysis, 26 (1991), 181199.

E. Eckbo Valuation Effects of Corporate Debt Offerings.” Journal of Financial Economics, 15 (1986), 119152.

E. Fama What's Different About Banks?Journal of Monetary Economics, 15 (1985), 2939.

E. Fama Market Efficiency, Long-Term Returns, and Behavioral Finance.” Journal of Financial Economics, 49 (1998), 283306.

E. Fama , and K. French . “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics, 33 (1993), 356.

M. Hertzel ; M. Lemmon ; J. Linck ; and L. Rees . “Long-Run Performance Following Private Placements of Equity.” Journal of Finance, 57 (2002), 25952617.

S. D. Howton ; S. W. Howton ; and S. B. Perfect . “The Market Reaction to Straight Debt Issues: The Effects of Free Cash Flow.” Journal of Financial Research, 21 (1998), 219228.

C. James Some Evidence on the Uniqueness of Bank Loans.” Journal of Financial Economics, 19 (1987), 217236.

K. Y. Jung ; Y. C. Kim ; and R. M. Stulz . “Timing, Investment Opportunities, Managerial Discretion, and the Security Issue Decision.” Journal of Financial Economics, 42 (1996), 159185.

S. Kothari , and J. Warner . “Measuring Long-Horizon Security Price Performance.” Journal of Financial Economics, 43 (1997), 301340.

S. Krishnamurthy ; P. Spindt ; V. Subramaniam ; and T. Woidtke . “Does Investor Identity Matter in Equity Issues: Evidence From Private Placements.” Journal of Financial Intermediation, 14 (2005), 210238.

S. Krishnaswami , and V. Subramaniam . “Information Asymmetry, Valuation, and the Corporate Spin-Off Decision.” Journal of Financial Economics, 53 (1999), 73112.

T. Loughran , and J. Ritter . “The New Issues Puzzle.” Journal of Finance, 50 (1995), 2351.

T. Loughran , and J. Ritter . “The Operating Performance of Firms Conducting Seasoned Equity Offerings.” Journal of Finance, 52 (1997), 18231850.

S. Lummer , and J. McConnell . “Further Evidence on the Bank Lending Process and the Capital Market Response to Bank Loan Agreements.” Journal of Financial Economics, 25 (1989), 99122.

J. Lyon ; B. Barber ; and C. Tsai . “Improved Methods for Tests of Long-Run Abnormal Stock Returns.” The Journal of Finance, 54 (1999), 165201.

R. Masulis , and A. Korwar . “Seasoned Equity Offerings: An Empirical Investigation.” Journal of Financial Economics, 15 (1986), 91118.

W. Mikkelson , and M. Partch . “Valuation Effects of Security Offerings and the Issuance Process.” Journal of Financial Economics, 15 (1986), 3160.

M. Mitchell , and E. Stafford . “Managerial Decisions and Long-Term Stock Price Performance.” Journal of Business, 73 (2000), 287329.

S. Myers , and N. Majluf , “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.” Journal of Financial Economics, 13 (1984), 187221.

J. Ritter The Long-Run Performance of IPOs.” Journal of Finance, 46 (1991), 328.

D. Katherine Spiess , and J. Affleck-Graves . “Underperformance in Long-Run Stock Returns Following Seasoned Equity Offerings.” Journal of Financial Economics, 38 (1995), 243267.

D. Katherine Spiess and J. Affleck-Graves . “The Long-Run Performance of Stock Returns Following Debt Offerings.” Journal of Financial Economics, 54 (1999), 4573.

A. Vijh Long Term Returns From Equity Carveouts.” Journal of Financial Economics, 51 (1999), 273308.

H. White A Heteroskedasticity-Consistent Covariance-Matrix Estimator and a Direct Test for Heteroskedasticity.” Econometrica, 48 (1980), 817838.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *