The Effect of Resale Constraints on Abnormal Returns of Borrowers in Syndicated Loans‪.‬

ABSTRACT We study the relationship between various loan characteristics and abnormal returns to client firms subsequent to commercial bank loans. Using a sample of 1,472 syndicated loans, we find that constraints on loan resale are predictive of short-run abnormal returns. Specifically, we find a negative relation between borrower consent constraints and short-run returns, while agent consent constraints actually appear to foster higher returns, particularly for issues with positive event performance. Our results are consistent with the notion that resale constraints are in place to mitigate potential financial distress, as well as to help facilitate relationships.