Bank loans and borrower value during the global financial crisis: Empirical evidence from France

• Impact of bank loan announcements on French borrower value.
• Significant and negative stock market reaction during the Global Financial Crisis.
• Explanations based on borrowers’ financial constraints and lenders’ identity.
• Significant changes in bank behavior during the crisis.
• Positive reaction to large loans from international banking pools to large borrowers.

We investigate the impact of bank loan announcements on borrower value during the recent boom and bust cycle of the 2000 s using a sample of 253 large loans to French borrowers. We find a significant and negative stock market reaction to bank loan announcements during the Global Financial Crisis. Hence, although we document significant changes in bank behavior during the crisis with conservative contractual and organizational modifications, we cannot provide empirical support for the certification value of bank loans during a period of increased informational asymmetries. We propose several explanations based on borrowers’ financial constraints and lenders’ identity. Nevertheless, bank loan announcements for larger firms receiving large loans funded by international pools of lenders contributed to borrower value even during the crisis.