The Information Content of Quarterly Earnings in Syndicated Bank Loans Prices

47 Pages Posted: 5 Aug 2004

See all articles by Linda Allen

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Hongtao Guo

City University of New York (CUNY) - Stan Ross Department of Accountancy

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy

Date Written: July 31, 2004

Abstract

We examine the information content of quarterly earnings announcements in the syndicated bank loan market, a hybrid public/private debt market that is exclusively comprised of informed institutional participants. In contrast to the literature on equity price reactions to earnings announcements, we find that bank loan returns experience no significant response on earnings announcement dates. However, we do find significant price movements in the secondary loan market four weeks prior to earnings announcement dates, around the time of the monthly covenant reports to members of the syndicate. Moreover, we find that the information content in syndicated bank loan prices is most pronounced for borrowers with predominantly intangible assets that experience declining earnings. Thus, we find evidence that when earnings announcements convey relevant information about the borrowing firm (i.e., for informationally opaque firms with declining creditworthiness), the syndicated bank loan market expeditiously incorporates that information into prices.

Keywords: Earnings announcements, syndicated bank loans

JEL Classification: G14, M41

Suggested Citation

Allen, Linda and Guo, Hongtao and Weintrop, Joseph, The Information Content of Quarterly Earnings in Syndicated Bank Loans Prices (July 31, 2004). Available at SSRN: https://ssrn.com/abstract=572847 or http://dx.doi.org/10.2139/ssrn.572847

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States
646-312-3463 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://stern.nyu.edu/~lallen

Hongtao Guo (Contact Author)

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3207 (Phone)
646-312-3161 (Fax)

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
212-802-6443 (Phone)
212-802-6423 (Fax)