Quotation Simion, Giorgia, Cavezzali, Elisa, Nathan, Siva, Rigoni, Ugo. 2020. Market discipline on bank bond issues through the lens of a new forward‐looking measure of loan quality. European Financial Management. 26 1350-1384.


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Abstract

Using unsecured bond spreads over the 2007 to mid‐2014 period, we test investors’ ability to price bank loan risk. We use a new measure of loan risk that incorporates forward‐looking information embedded in ratings assigned by external rating agencies to bank loan portfolios. Only Italian banks are required to systematically disclose this specific information. We find that investors do price forward‐looking information inherent in bank loan portfolios. This finding reflects the increase in risk perception following the sovereign debt crisis, which had the strongest effects on peripheral countries, with tensions in the lending market. Overall, these results suggest that our new forward‐looking measure provides an additional channel through which market discipline can operate.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal European Financial Management
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-C, WH-B
Language English
Title Market discipline on bank bond issues through the lens of a new forward‐looking measure of loan quality
Volume 26
Year 2020
Page from 1350
Page to 1384
Reviewed? Y
URL https://onlinelibrary.wiley.com/doi/10.1111/eufm.12262
DOI https://doi.org/10.1111/eufm.12262
Open Access N
JEL G21

Associations

People
Simion, Giorgia (Details)
External
Cavezzali, Elisa (Ca’ Foscari University of Venice, Italy)
Nathan, Siva (Georgia State University, United States/USA)
Rigoni, Ugo (Ca’ Foscari University of Venice, Italy)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5305 Bank management (Details)
5361 Financial management (Details)
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