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September 21, 2014
 
 
Canadian Excellence

Robert Mathieu




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Robert Mathieu

A note on: Capital adequacy and the information content of term loans and lines of credit (ABSTRACT)


André, P., Mathieu, R., & Zhang, P.

published: 2001 | Research publication | Refereed Journals - Accounting

André, P., Mathieu, R., & Zhang, P. (2001). "A note on: Capital adequacy and the information content of term loans and lines of credit". Journal of Banking and Finance, 25 (2), 431-444.



ABSTRACT:  This study examines the information content conveyed by the disclosure of credit agreements in a Canadian setting. We argue that the introduction of the 1988-capital adequacy requirements lead banks to reduce their level of commitment at the issuance of lines of credit to avoid their inclusion in the calculation of the capital ratio. As a result, after 1988, the disclosure of lines of credit is expected to be less informative than the disclosure of term loans since banks may exert less effort to screen and monitor firms. Our results are consistent with the argument that the difference between the market reactions at the disclosure of term loans and lines of credit is significant after 1988. We also provide evidence that firm size and concentration of borrowing affect the market reaction at the disclosure of bank credit agreements.

Author Keywords: Information of bank credit agreements; Capital adequacy

JEL classification codes: G21

Download the article at: http://dx.doi.org/10.1016/S0378-4266(99)00130-2

revised Jan 19/05

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