Does the Bank’s Monitoring Ability Matter
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چکیده
This study investigates the relationship between the borrowing firm’s abnormal loan announcement return and the lending bank’s monitoring ability. We use new, well-specified proxies for the bank’s monitoring ability to isolate and examine the effect of superior monitoring on the value added to the borrower. A number of recent studies have suggested that bank loan relationships, and hence the related monitoring services, no longer matter. In contrast to these studies we find a strong positive relationship between our proxies and the borrowing firm’s abnormal return in the 1995 to 1999 period, suggesting that superior monitoring banks add more value to the borrower. Corresponding author:
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