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Bank Debt versus Bond Debt: Evidence from Secondary Market Prices

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  • EDWARD I. ALTMAN
  • AMAR GANDE
  • ANTHONY SAUNDERS

Abstract

This paper uses a new data set of daily secondary market prices of loans to analyze the specialness of banks as monitors. Consistent with a monitoring advantage of loans over bonds, we find the secondary loan market to be informationally more efficient than the secondary bond market prior to a loan default. Specifically, we find that secondary market loan returns Granger cause secondary market bond returns prior to a loan default. In contrast, secondary market bond returns do not Granger cause secondary market loan returns prior to a loan default.

Suggested Citation

  • Edward I. Altman & Amar Gande & Anthony Saunders, 2010. "Bank Debt versus Bond Debt: Evidence from Secondary Market Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 755-767, June.
    • Handle: RePEc:wly:jmoncb:v:42:y:2010:i:4:p:755-767
    DOI: 10.1111/j.1538-4616.2010.00306.x
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