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Alternative Information Sources and the Information Content of Bank Loans

Alternative Information Sources and the Information Content of Bank Loans ABSTRACT This paper examines the information content of bank loan agreements. We differentiate borrowers according to financial analysts' percentage earnings forecast errors and most recent forecast revisions. The empirical results suggest that banks rely on other indicators as initial screening devices to determine where to best deploy their evaluation and monitoring efforts. If these other indicators are reliable and signal‐improving prospects, banks do little further investigation. However, if the indicators are noisy and signal‐declining prospects, banks have incentives to expend resources to investigate the borrowers, resulting in the production of valuable information. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Alternative Information Sources and the Information Content of Bank Loans

The Journal of Finance , Volume 48 (4) – Sep 1, 1993

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References (19)

Publisher
Wiley
Copyright
1993 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1993.tb04765.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper examines the information content of bank loan agreements. We differentiate borrowers according to financial analysts' percentage earnings forecast errors and most recent forecast revisions. The empirical results suggest that banks rely on other indicators as initial screening devices to determine where to best deploy their evaluation and monitoring efforts. If these other indicators are reliable and signal‐improving prospects, banks do little further investigation. However, if the indicators are noisy and signal‐declining prospects, banks have incentives to expend resources to investigate the borrowers, resulting in the production of valuable information.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1993

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