When bank loans are bad news : Evidence from market reactions to loan announcements under the risk of expropriation

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)233-252
Journal / PublicationJournal of International Financial Markets, Institutions and Money
Volume22
Issue number2
Online published4 Oct 2011
Publication statusPublished - Apr 2012
Externally publishedYes

Abstract

In this paper we investigate whether inefficient bank loans can reduce the value of borrowing firms when expropriation of the stock of minority shareholders by controlling shareholders is a major concern. Using data from Chinese banks, we find that bank loan announcements generate significantly negative abnormal returns for the borrowing firms. In line with this expropriation view, negative stock price reactions following bank loan announcements are concentrated in firms that are perceived to be more vulnerable to expropriation by controlling shareholders. Finally, we find evidence that a negative relationship between market reactions and firm vulnerability to expropriation exists only when firms borrow from the least efficient banks.

Research Area(s)

  • Bank loans, Bank monitoring, Expropriation

Citation Format(s)

When bank loans are bad news : Evidence from market reactions to loan announcements under the risk of expropriation. / Huang, Weihua; Schwienbacher, Armin; Zhao, Shan.

In: Journal of International Financial Markets, Institutions and Money, Vol. 22, No. 2, 04.2012, p. 233-252.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review