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Essay / Research Paper Abstract
A 5 page
paper which examines the fundamental elements of “The Long-Run Performance of
Firms Following Loan Announcements” by Matthew T. Billett, Mark J. Flannery; and Jon
A Garfinkel. No additional sources cited.
Page Count:
5 pages (~225 words per page)
File: JR7_RAlngrun.rtf
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Unformatted sample text from the term paper:
inside loans as well as outside funding. In the words of the authors they intend to "evaluate whether the short-run valuation effects of inside loan announcements persist" (Billett, Flannery and
Garfinkel, 2001; p. 3). They ask the following important questions in these regards: " Do investors initially under-react to the benefits associated with bank loans? Or do loans resemble other
sources of external funding enough so that the longer-run effects are negative?" (Billett, Flannery and Garfinkel, 2001; p. 3). Why Is the Question Important? As we can easily
understand, keeping a financial institution stable is a very important aspect of our economic system. And, in regards to the specific questions addressed in the paper, the authors argue specific
points in regards to the importance of answering the question: "This is an important research issue because loans have a prominent place in the capital-raising process. In the aggregate, bank
loans account for approximately 30% of all U.S. nonfinancial corporations credit, and this proportion is doubtless higher abroad" (Billett, Flannery and Garfinkel, 2001; p. 3). In addition, the authors note
that "bank loan financing is typically a major financing event" which, in essence, can serve to influence the general economy of our society in one way or another (Billett, Flannery
and Garfinkel, 2001; p. 3). Research Strategy In understanding the research strategy we first briefly touch on the data accumulated by the authors. "In collecting data for an
earlier paper (Billett, Flannery and Garfinkel [BFG, 1995]), we used a keyword search of news stories to identify 1,468 announced loan agreements between nonfinancial borrowers and banks or nonbank lenders
during the calendar years 1980 through 1989. That papers focus on loan announcement effects led us to concentrate on a clean sub-sample of 626 announcements with no confounding events around
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