The effect of abnormal institutional attention on bank loans

Yin Siang Huang, Dien Giau Bui, Chih-Yung Lin*, Robin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate whether abnormal institutional attention (AIA, measured following Ben-Rephael, Da, and Israelsen, 2017) influences bank loans. First, we find that AIA is positively related to borrowers’ cumulative abnormal returns around loan announcements. Second, banks charge a significantly lower loan spread, require less collateral, and approve larger loans for borrowers with higher AIA. Third, the effect of AIA becomes stronger when borrowers have high information asymmetry and weak market competition. Overall, our findings support the idea that banks consider AIA information when making lending decisions.

Original languageEnglish
Article number101458
JournalJournal of International Financial Markets, Institutions and Money
Volume76
DOIs
StatePublished - Jan 2022

Keywords

  • Bank loan contracts
  • Cumulative abnormal returns
  • Financing cost
  • Institutional attention
  • Loan announcements

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