| Author: | Sawada, Y. |
| Title: | Secondary market efficiency for LDC bank loans and international private lending, 1985-1993 |
| Journal: | Journal of International Money and Finance
2001 : AUG, VOL. 20:4, p. 549-562 |
| Index terms: | MARKET EFFICIENCY BANKS LOANS |
| Language: | eng |
| Abstract: | Since the Debt Crisis in 1982, the secondary market for developing country bank loans has rapidly become a key element in the debt strategies. Based on the present value model of secondary market price, this paper tests joint hypotheses of the market's efficiency and the various expectation models. As far as actively traded debt is concerned, the authors find that the prices indicate the market efficiency. Large and negative differences between expected returns for new and old credit during 1987-90 imply the effects of bank regulations and the failure to establish seniority for new money. The results of this paper show that, only after 1993, an expected rate of return for new money increased significantly, and thus, new private lending extended substantially. |
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