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    Targeted by an activist hedge fund, do the lenders care?

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    Publication type
    Conference Presentation
    Author
    Matthys, Thomas
    Dahiya, Sandeep
    Hallak, Issam
    Publication Year
    2018
    
    Metadata
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    Abstract
    Do banks worry about expropriation when an activist hedge fund targets their borrowers or are they reassured that their borrowers will perform better after such targeting? We study 1,435 events from 1996-2013 in which an activist targeted a US corporation to examine what happens to loan contract terms post-targeting. We find that banks charge a higher interest rate for loans made after the activist involvement compared to a matched sample of borrowers that were not targeted. However, we find that the initial stock price reaction to the announcement of an activist intervention is a strong predictor of post-target loan rates. Banks increase the loan rates for those targets that experience a strong positive stock price reaction. These findings suggest that banks adjust their loan pricing to reflect their concerns about wealth expropriation.
    Keyword
    Banks
    Knowledge Domain/Industry
    Accounting & Finance
    URI
    http://hdl.handle.net/20.500.12127/6339
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    Conference Presentations

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