Open AccessResponses of Stock Price to the Public Announcement of Forms of Borrowing
Author(s) -
Khairul Kabir Sumon,
Md. Sazib Miyan
Publication year - 2021
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v13n10p169
Subject(s) - abnormal return , loan , event study , stock (firearms) , monetary economics , economics , order (exchange) , business , econometrics , financial economics , actuarial science , finance , stock exchange , mechanical engineering , paleontology , context (archaeology) , engineering , biology
This study investigates the question of whether an announcement of bank loan agreement increases the abnormal return. That is, the bank loan agreement conveys some positive information about the borrowing firm. The study used three different event windows (i.e.) two-day, three-day, and five-day windows to check the effect of the announcement for a period of 1995 to 2015. In order to measure the effect, the return has been calculated using the market model, then CARs have been calculated. The study found that CARs is statistically significant for all of the three-event windows. In the two-day window, it is found that abnormal return increases by 15 BPS within these two days, which is almost 19.315% on an annual basis. It is also evident in the study that the effect of the announcement is more on small size firms.