The Value of Bank Durability: Borrowers as Bank Stakeholders

MYRON B. SLOVIN, Marie Sushka, JOHN A. POLONCHEK

Research output: Contribution to journalArticle

185 Scopus citations

Abstract

We examine the value of bank durability to borrowing firms. The analysis is based on theoretical models of the asset services view of intermediation which imply that private information and associated relationship‐specific activities are intrinsic to bank lending. We analyze share price effects on firms with lending relationships with Continental Illinois Bank during its de facto failure and subsequent FDIC rescue. We find the bank's impending insolvency had negative effects and the FDIC rescue positive effects on client firm share prices. We conclude that borrowers incur significant costs in response to unanticipated reductions in bank durability and thus are bank stakeholders. 1993 The American Finance Association

Original languageEnglish (US)
Pages (from-to)247-266
Number of pages20
JournalJournal of Finance
Volume48
Issue number1
DOIs
StatePublished - 1993
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The Value of Bank Durability: Borrowers as Bank Stakeholders'. Together they form a unique fingerprint.

  • Cite this