The market reaction to debt announcements: UK evidence surrounding the global financial crisis

Andrew Marshall, Laura McCann, Patrick McColgan (Corresponding Author)

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We examine the stock market response to announcements of public, bank and privately placed debt issuance by large UK firms surrounding the global financial crisis of 2008. Prior to the crisis, we find that stock prices respond positively to announcements of bank debt issuance only. This is restricted to the sub-sample of syndicated bank loans and this is suggestive of the certification from multiple lenders conveying a signal of creditworthiness. We find that abnormal returns on the announcement of bank loans have declined since the financial crisis, both in absolute terms and in comparison to alternative borrowing sources. Overall, our results suggest that surrounding the global financial crisis of 2008, bank loans have become less informative as a signal of the creditworthiness of borrowing firms.
Original languageEnglish
Pages (from-to)92-109
Number of pages18
JournalBritish Accounting Review
Volume51
Issue number1
Early online date20 Apr 2018
DOIs
Publication statusPublished - 1 Jan 2019

Fingerprint

Announcement
Bank loans
Market reaction
Debt
Global financial crisis
Borrowing
Creditworthiness
Stock market
Market response
Bank debt
Abnormal returns
Stock prices
Financial crisis
Certification

Keywords

  • public bonds
  • bilateral loans
  • syndicated loans
  • privately placed debt
  • event study
  • borrower value

Cite this

The market reaction to debt announcements : UK evidence surrounding the global financial crisis. / Marshall, Andrew ; McCann, Laura; McColgan, Patrick (Corresponding Author).

In: British Accounting Review, Vol. 51, No. 1, 01.01.2019, p. 92-109.

Research output: Contribution to journalArticle

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