Financial Intermediation, lender equity and project finance debt mandates
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Fernando Distadio, Luiz
Ferguson, Andrew
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Paris, France
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Abstract
We study market reactions to mining developers announcing project finance debt mandates. We document a significant mean (median) 3-day abnormal return of 4.3% (2.77%), consistent with information transfer from private lenders to equityholders. Thus, the daily market reactions are stronger for debt mandate announcements than for project finance approvals consistent with a greater reduction in information asymmetry and/or the ‘retention of the option to wait’. Cross-sectional tests indicate that debt mandates where lenders hold equity positions in the borrower experience higher abnormal returns, suggesting lender equity conveys important signals of information asymmetry reduction for borrowers in project finance.
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8th Paris Financial Management Conference (PFMC-2022)
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© 2022 Paris Financial Management Conference. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the conference's website for access to the definitive, published version.
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Accounting, auditing and accountability
Banking, finance and investment
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Distadio, L; Ferguson, A; Altansukh, L, Financial Intermediation, lender equity and project finance debt mandates, 8th Paris Financial Management Conference (PFMC-2022), 2022