Legal risk and information spillover through private lender reports

Abe de Jong, Tim Kooijmans and Chris Veld

Journal of Financial Markets, 2022, vol. 60, issue C

Abstract: We investigate the effect of legal risk on private information spillover from syndicated loan borrowers to equity markets. We find evidence that is consistent with leakage of information provided to institutional investors in monthly private reports. We expect that insiders avoid the adverse consequences of noise trading by timing trades closely before public announcements. Consistent with this expectation, during a period of low legal risk, we observe abnormal stock returns just before public earnings releases. When legal risk increases, the information leakage decreases. We also find that reputational risk mitigates insider trading after private information releases.

Keywords: Private information; Legal risk; Covenants; Information spillover; Private debt (search for similar items in EconPapers)
JEL-codes: G14 M41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:60:y:2022:i:c:s1386418122000027

DOI: 10.1016/j.finmar.2022.100706

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