Third World Debt Default Announcements and Market Learning: Effects of Sequential Debt Defaults on U.S. Banks

Managerial Finance - Tập 22 Số 7 - Trang 69-86 - 1996
George C.Philippatos1, K.G.Viswanathan2
1Professor of Finance, Department of Finance, University of Tennessee, Knoxville, TN 37996
2Assistant Professor of Finance, Department of Banking and Finance, Hofstra University, Hempstead, NY 11550

Tóm tắt

From 1982 to 1987, several Third World borrowers defaulted on their loans to U.S. creditor banks. The defaults resulted in the deterioration of the quality of loan assets held by the banks. The purpose of this study is to analyze the market reaction to a series of sovereign debt defaults. Specifically, we analyze eight events during the six year period to find out how the market reaction changed from one event to the next. Standard residual analysis and volatility tests are applied to a sample of 75 banks common to all eight events. The speed of adjustment to the sequential events indicates that with each event, the market becomes better informed and there is evidence of market learning. New SEC regulations requiring banks to disclose significant exposures to foreign borrowers and increasing awareness about the quality of the loan portfolio of banks helped in the market correctly evaluating the effects of defaults on the lenders.

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Tài liệu tham khảo

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Managerial Finance

Tập 22 Số 7

69-86

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