Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Myron B. Slovin


In this thesis, we test the hypothesis that banks provide monitoring services that benefit client firm shareholders. We argue that if the value of firm-bank relationships stems from monitoring services provided by banks, then share price responses associated with announcements of bank loans should be cross-sectionally related to variables that proxy the degree of monitoring to which firms are already subject. Our sample differs from previous studies of bank debt announcements in two key aspects: inclusion of NASDAQ firms, and inclusion of announcements carried by the newswire but not the Wall Street Journal. Consistent with suggestions by Fama (1985) and Diamond (1985) and theoretical models in the accounting literature, we find that firm size is a significant determinant of capital market reactions to bank debt announcements--average share price responses are statistically positive only for small firms. Moreover, share price responses are negatively related to firm size within the small firm sample. We also find that initiations of bank debt generate statistically positive average share price responses, a result strikingly different from previous anomalous findings of statistical significance only for renewals of bank debt.