The market reaction to syndicated loan announcements before and during the COVID-19 pandemic and the role of corporate governance

This study examines the wealth effects of syndicated loan announcements before and after the onset of the COVID-19 outbreak. Using a sample of 637 loan announcements by European borrowers, we find significantly higher wealth gains during the pandemic compared to the pre-pandemic period. The results suggest that the certification of multiple lenders loans conveys a positive signal for the borrowers' creditworthiness during the pandemic-driven economic melt-down. We further show that certain corporate governance mechanisms, such as board size, gender diversity, and CEO duality and compensation, are related differently to borrowers' excess returns before and after the COVID-19 pandemic. The results are robust to alternative model specifications that control for different estimation models and event windows. They also hold after addressing self-selection bias.