Bank Debt versus Bond Debt: Evidence from Secondary Market Prices

Edward Altman, Amar Gande and Anthony Saunders

Journal of Money, Credit and Banking, 2010, vol. 42, issue 4, 755-767

Abstract: This paper uses a new data set of daily secondary market prices of loans to analyze the specialness of banks as monitors. Consistent with a monitoring advantage of loans over bonds, we find the secondary loan market to be informationally more efficient than the secondary bond market prior to a loan default. Specifically, we find that secondary market loan returns Granger cause secondary market bond returns prior to a loan default. In contrast, secondary market bond returns do not Granger cause secondary market loan returns prior to a loan default. Copyright (c) 2010 The Ohio State University.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:42:y:2010:i:4:p:755-767

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