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- Title
Financial Distress and Bank Lending Relationships.
- Authors
DAHIYA, SANDEEP; SAUNDERS, ANTHONY; SRINIVASAN, ANAND
- Abstract
We use a unique data set of bank loans to examine the wealth effects on lead lending banks when their borrowers suffer financial distress. We find a significant negative announcement return for the lead lending bank when a major corporate borrower announces default or bankruptcy. Banks with higher exposure to the distressed firm have larger negative announcement-period returns. The existence of a past lending relationship with the distressed firm results in larger wealth declines for the bank shareholders. Finally, financial distress also has a significant negative effect on borrower’s returns.
- Subjects
MANAGEMENT of bank loans; BANKING industry; FINANCIAL crises; CORPORATE finance; LOANS; DEFAULT (Finance); BANKING research; REGULATED industries; BANKRUPTCY; RISK exposure; MANAGEMENT
- Publication
Journal of Finance (Wiley-Blackwell), 2003, Vol 58, Issue 1, p375
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/1540-6261.00528