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 language | English (US) |
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Pages (from-to) | 247-266 |
Number of pages | 20 |
Journal | The Journal of Finance |
Volume | 48 |
Issue number | 1 |
DOIs | |
State | Published - Mar 1993 |
Externally published | Yes |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics